ABDULAZIZ AL-ONAIZAN

Saudi Arabia 2021 | FINANCE | VIP INTERVIEW

TBY talks to Abdulaziz Al-Onaizan, CEO of Bank Albilad, about ongoing digital transformation efforts, the effects of COVID-19, and expectations on the coming two years.

How has your digital transformation effort fared during and after the pandemic?

We were fortunate to start our digital transformation journey in early 2017. We are starting to see real benefits of the transformation that we have undertaken. 83% of our customers' accounts were registered online as we entered the crisis, and 65% of our customers have been active users of our electronic channels. We have seen more than 50% growth in the usage of mobile application transactions and an upsurge in our remittance business, which is primarily driven by expats and foreign workers in the country. We have migrated almost 35% of that business to digital channels. The pandemic triggered the use of these channels even more. If you are migrating customers to digital channels, then you require 24/7 aftersales services, which consequently resulted in tremendous growth in our social media and call center coverage as well. We launched a multi-language call center that speaks eight languages to cater to customers of various nationalities. We started all of these before the pandemic, but the pandemic accelerated it. Our customer experience delivery is excellent. The investments we made in infrastructure, advanced digital technology and communication capabilities helped ensure a smooth transition. We are reaping the benefits of migrating our business to digital, strengthening our brand and allowing us to capture more market share.

Can you break down your 2Q2020 results and explain how you were able to maintain your margins during the lockdown?

There are two elements. One is the fee income, which was adversely impacted a by the pandemic. There were initiatives taken by the government and the central bank to waive fees on certain transactions through electronic channels, which lowered our fee income. However, we have been gaining market share and have built a strong portfolio. Our income has been increasing driven by the rising yields on our investments, while our net interest margin is still excellent. We managed to capture some opportunities during the pandemic since there were some market dislocations. We also sustained our growth in the housing sector and are currently number four or five in terms of housing market share. This allowed us to maintain our level of income, albeit lower fee income. Crucially, we also rationalized some expenses, as one must be extremely efficient during tough periods, and that has helped us as well. Our previous investments in technology underpinned our strategy to streamline our operations to maximize efficiency.

Can you outline the performance of the housing sector for the bank and the impact of the pandemic?

We continue to see opportunities in the housing sector. Even with the VAT increasing from 5% to 15%, the government is refunding the VAT for first-time homeowners up to a certain threshold. There is a huge untapped market for first homes in the Kingdom. This has helped us maintain the same level of growth, even as the market for homes above SAR1 million has slowed down slightly. Our focus has always been on first home buyers, as it is more stable and secure compared to second or third home buyers, which are highly leveraged and subject to volatility.

What other sectors is the bank seeing growth in today?

Our corporate banking is focusing on niche transactions, and we have been growing there. There is also the SME sector, which is at the forefront of Vision 2030. The restructuring of SME grants has helped increase the appetite of banks to look at the SME sector. Our focus for SMEs has been to design programs for certain business activities instead of having to look at deal by deal or transaction by transaction since it will be operationally intensive. We have been focusing on designing special programs for certain business activities and automating the process. We have done this for Hajj and Umrah, for example, which is performed every year. There are SMEs active in this space, and we have done special programs for them that allowed us to capture 70% of this business. SMEs are a self-funded portfolio, because if you have a pool of say 10,000 SMEs operating with you, and you provide them credit, it will be self-sustaining as these accounts will fund each other. Moreover, if you afford SMEs with the technology and services they need, they will maintain their accounts with you, and in the process allow you to provide other SMEs the short-term finance they require. We see plenty of opportunities here.

Where do you see the bank in the coming two years?

Over the last period, we have been extremely conservative in terms of our portfolio approach. We have built our coverage ratio to the point where we are second highest, and our NPLs are still low. We have also been conservative to cushion ourselves in difficult times, so I have no concerns over the health of our portfolio. Our investments in people, processes, technology, and governance over the past few years are showing their benefits. The machinery now works extremely well. We now need to focus more on sales and marketing to gain market share, as the bank fully capitalizes on these investments. Today, we are the fifth largest in terms of branch network, and we have a remittance business that some other banks do not have. All these investments will definitely play a significant role in driving the business. I am extremely optimistic that we will continue to post double-digit growth over the coming few years, even during challenging times. We are getting high level of satisfaction in terms of how stakeholders perceive the bank, and that will definitely boost growth going forward.