By Arab News
By Basil M.K. Al-Ghalayini*
I was 25 when I landed a job with the National Commercial Bank (NCB) almost one week after arriving in Jeddah from Boston. I was hired as part of the investment management division (IMD) team to set up the first Murabaha fund in Saudi Arabia.
At that time and before the creation of the Capital Market Authority, the IMD was performing the same activities as NCB Capital now. The team was made up of seven highly educated Saudi members headed by an experienced US executive headhunted from Citibank.
Back then, a new era began for NCB — headed by CEO Abdulhadi Shayef — as the most progressive Saudi financial institution offering commercial and advanced investment banking services.
It started to hire top Saudi talents, as well as expatriates, and had a global network of offices in New York, London, Tokyo and Beirut. NCB’s triangular headquarters became the first skyscraper in the entire Gulf Cooperation Council.
With the recently signed memorandum of understanding for its acquisition of Samba Financial Group, another era has started for NCB, making it the fastest-growing bank in the Middle East under the leadership of Saeed Al-Ghamdi as new CEO.
The banking sector in Saudi Arabia has been active in executing mergers and acquisitions. This latest merger will be the second in recent years following the successful tie-up of SABB and Alawwal banks. I believe that there is an economic viability for further mergers, especially among banks that operate fully under Shariah compliance guidelines.
Another financial sector that is also seeing more mergers and acquisitions is insurance.
The Saudi Arabian Monetary Authority (SAMA), the Kingdom’s central bank and regulator of the insurance sector, has been encouraging insurance companies listed on the Saudi Stock Exchange (Tadawul) to strengthen their financial positions through consolidation.
With the proposed capital requirement to be implemented in the future, insurance companies with low capital will be forced to either increase their capital, consolidate or phase out of the market.
So far, Walaa Cooperative Insurance Co. and MetLife AIG ANB Cooperative Insurance Co. have merged, while other companies have announced merger plans. These include Aljazira Takaful Taawuni Co. with Solidarity Saudi Takaful Co., Gulf Union Cooperative Insurance Co. with Al-Ahlia for Cooperative Insurance Co., and Saudi Enaya Cooperative Insurance Co. with Amana Cooperative Insurance Co.
I believe the consolidation wave will continue to build a healthier and stronger financial sector. We may see another announcement in the banking sector during first half of next year, but can definitely expect several announcements in the insurance sector.
As BMG Financial Group has been the most active boutique authorized financial adviser since 2005, taking 12 insurance companies public and advising one of the potential mergers mentioned above — coupled with a dynamic team in the mergers and acquisitions unit of the insurance supervisory department at SAMA — we believe that future consolidation among insurance players will continue, with the number reduced to 20 companies by 2022.
*Basil M.K. Al-Ghalayini is the chairman and CEO of BMG Financial Group.