A recent survey regarding current downturns in the market value of 18 global and Gulf banks during the period from end of September 2008 until the close of trading on Sunday 22nd of February 2009, showed that Al Rajhi Bank is ahead of all other Gulf banks in terms of market value which amounted of $22.4 billion.
The survey prepared by Kuwait’s Al-Qabas newspaper showed that Al Rajhi Bank surpasses the National Bank of Kuwait, which was ranked second with a market value of $10.81 billion. SAMBA was third with $9.8 billion, while the Saudi British Bank (SABB) ranked fourth with $9.44 billion and Kuwaiti Fund House was fifth on the list with a market value of $7.91billion.
Furthermore, according to the survey results Al-Rajhi Bank was ahead of leading global banks, including: Morgan Stanley with $20.88 billion, Deutsche Bank with $13.83 billion, Barclays with $11.58 billion, Royal Bank of Scotland (RBS) with $10.93 billion and CitiBank with $10.63 billion. The National Bank of Kuwait had a bigger market value from AlRajhi Bank.
The survey concluded that HSBC is the largest bank on the list in terms of market value with $83.72 billion, G.P. Morgan came in the second place with $74.72 billion, while Wells Fargo came third with $45.37 billion.
Since the end of last September until the end of 22nd of February 2009, RBS was the bank that lost the most in market value with a drop of 91.3 %, falling from $126.27 billion to $10.93 billion on 30th September 2008. CitiBank was the second biggest loser with a drop of 90.5%, its market value falling to $10.63 billion from $111.78 billion by end of September 2008. Bank of America was in third place with an 89.1% drop in market value, down from $222.54 billion to $24.23 billion by end of September 2008. Significantly, the survey results showed that the market values of Gulf banks were less affected than their global counterparts.
The survey noted that several bankers expressed the opinion that among the factors that made the market values of Gulf banks less susceptible to the global crisis are: their activities are mainly concentrated on the local market as opposed to global banks that expanded their lending operations to a number of countries around the world; Gulf banks were not affected by the real estate mortgages crisis in USA; and ready availability of liquidity because the Gulf countries were supporting local banks by depositing substantial revenues.
Financial allocations against failure in payments are considered to be the most important element that made the market values of Gulf less affected by the crisis. Beginning in the fourth quarter of last year, the substantial allocations made by Gulf banks are considered as a guarantee of their ability to cope with any effects of the global crisis and defaults in loan repayments.
Local bankers consider that despite the profits of Gulf banks being affected by their allocations, they gain in assurance against serious effects. Furthermore, the excellent profits achieved by Gulf banks during 2008 reflect their strong performance and ability to survive the current crisis.
The survey also noted several other factors that made Gulf Banks’ market values less affected by the global crisis, these being semi-guaranteed consumer loans, the central banks’ major role in eliminating risks of local banks, and substantial government spending to compensate for the shortage of funds for private sector projects.