Attention on asset quality reaps rich rewards

In an exclusive interview for Cash & Trade Zaki M. Jawad, Saudi Hollandi Bank’s Head of Transaction Banking Group explains why he believes there is tremendous growth potential for trade business in the kingdom.

This must be an opportune time to be a banker in Saudi Arabia, which has been protected from the worst effects of the global downturn, and especially to be working for the bank showing the healthiest growth in profitability in the Kingdom during 2008.

Of course, our achievements during 2008 were excellent and the result of teamwork, commitment and also our exceptional customer care policy.

Were you satisfied with the growth in your trade fees and commissions in 2008, up from 117,018 Saudi Arabian Riyals (SAR) ($31,209) in 2007, to SAR162,658 ($43,422) last year?

 Overall, we are very satisfied with our trade performance in 2008. All areas of trade performed well and each recorded impressive growth in imports.

Have you budgeted for further growth in 2009? Is the interest income for trade asset backed finance inter alia bigger or smaller than the fees and commissions?

 Budgets are in place for 2009. Income from the lending portfolio is a key component in any financial institution’s profits and SHB is no exception to this general rule.

Can you elaborate on the success of your trade asset backed finance products in terms of number of customers, level of assets and scope for growth and innovation?

 At SHB we adopt a conservative approach to our financing. The quality of the asset is of prime concern to us, more important than any other factor and this has led to our success in asset backed financing. There is tremendous scope for the growth of trade business in the Kingdom of Saudi Arabia and we would compete for any business that matches our risk criteria. We have also developed some products to conduct asset backed financing.

Do you find certain industries make more use of this source of finance than others and from which industries, if any, do you expect a wider take-up in future?

 In general, the trading sector is much more involved in this source of financing. Meanwhile, in view of the increasing credit periods offered/ demanded by the competition, the need for bridging finance is increasing.

How have you developed your relationship with The Saudi Fund for Development and in particular its SEP programme?

 We have had several discussions with the Fund to explore opportunities to work with them within their SEP programme. We are currently evaluating the programme and its benefits, and will make a decision soon.

How has the shape of your trade business changed in terms of volume and value of L/Cs, guarantees and collections?

 We have not noticed a significant change in the shape of our trade business.

Customers are becoming increasingly risk conscious – more than ever before, so the instruments that provide a greater degree of protection to both seller and buyer are still much in demand.

Like other Saudi Arabian banks you have enjoyed continuous growth in profits from trade. Is trade considered central to SHB’s corporate bank offering?

We have always enjoyed a significant share of Saudi Arabia’s trade business and this situation remains unchanged.
Trade is the core business of the corporate banking sector and one of the main contributors to the bottom line.

Have you found that the utilisation of trade related credit facilities has increased in recent, turbulent times?

In 2008, all our trade facilities were well utilised; although some areas are now showing a slight downturn, overall our trade facility utilisations remain at healthy levels.

Has SHB’s risk appetite for trade facilities, corporate and FI changed in recent times and, if so, how?

We are cautious and watching the situation very carefully.
Obviously the risk appetite for FI needed to change following certain surprises taking place in the global market.

Have you adjusted your political risk appetite to support exporters and, if so, how, and in connection with which countries/regions?

We have taken some measures to strengthen FI risk management but it has not affected our support to exporters.

What is the structure of your team responsible for supporting trade in terms of product management, sales, client services and operations?

 We have fully assessed the requirements of trade customers and established the necessary lines and allocated the appropriate numbers of staff for the smooth conduct of business.
Operations Units are the delivery points. Trade Finance, a division under Transaction Banking Group (TBG), gives support through:
1) sales teams to monitor and increase, where necessary, the utilisation of facilities; swiftly resolve customer issues and, where required, provide technical training to customers.
2) product management for relevant improvements in products, services, systems and procedures and also for the development of new products and implementation of best practice.

We serve our customers locally, through the regional offices in Riyadh, Jeddah and Al-Khobar.
Additionally, a trade sales team in Jubail focuses on business in the industrial area. We are proud of a strong, wellexperienced team to manage the trade business at our bank.

How do you see the future of online services for trade?

Online users are increasing. Customer confidence levels in the new technology are key to this development. Currently, most of the customers use online trade facilities for inquiries only.

Trade is notorious for exception processing due to credit issues and document discrepancies. Can you comment on your experience in this area and on any initiatives you have put in place to help customers improve their efficacy?

Credit and compliance are inseparable in trade; protection and rights come from these two elements. We take a keen interest in educating our customers on such matters. We regularly conduct training programmes and seminars to update them on current global trade affairs, products, ICC rules and publications.

What investment is SHB making in improving its staff’s skills to help educate trade customers and promote increased levels of support for them?

We pay a great deal of attention to the training needs of our staff and ensure they participate in important local and foreign seminars in order to constantly update and enhance their knowledge and skills. In addition to regular seminars for our own customers, SHB trade sales managers also conduct customised training programmes as a service to other companies whether they are existing clients of ours or not.

What is your choice of core banking system and trade system application and are you satisfied with their implementation?

We are satisfied with the performance of the existing systems and are continuously improving them to enhance operation and efficiency. Presently, we are working on expanding our online and back-end trade capabilities.

Do you have any plans for further investment in this area? We are committed to provide the best to our customers and would not hesitate to invest in technology in order to provide convenience and superior service to them if and when it might become available.