Table of content:

Introduction.............................................................................................................2
Al Rajhi international presence.............................................................................2
Products and services offered by the bank.........................................................3-4
Al Rajhi in Malaysia................................................................................................4
Financial Strength..................................................................................................5-6
SWOT Analysis.......................................................................................................6
Strategy for the future............................................................................................7
Conclusion..............................................................................................................8
References..............................................................................................................9

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Introduction:
Saudi Al Rajhi Bank
The Al Rajhi Bank, founded in 1957, is one of the largest Islamic banks in the world
with total assets of US$71.2 billion. In 1978 the various entities under Al Rajhi were
merged into Al Rajhi Trading and Exchange Corporation. In 1988, the bank was
established as a Saudi share-holding company. Headquartered in Riyadh, the bank
has a wide network of more than 500 branches, 100 dedicated ladies’ branches, and
3300 ATMs. The bank also has 25,000 point-of-sale terminals and 130 remittance
centers in Saudi Arabia.

Al Rajhi international presence:

Al Rajhi focuses on diversification through expansion in investment, corporate, and

retail banking sectors. The bank has an emphasis on innovative banking and
investment services through the concept of e-banking. Al Rajhi has an international
presence in Malaysia, Kuwait, and Jordan. It was the first foreign bank to be awarded
a full banking license by Bank Negara in Malaysia. The bank has a paid-up capital of
SR15 billion and is listed on the Saudi Stock Exchange. Al Rajhi is the largest
commercial bank in terms of market capitalization in Saudi Arabia. In 2012, the bank
had 4.57 million customers and occupied the top position in terms of loans, advances,
and profitability.

The bank focuses on maintaining its strong retail position in the Kingdom of Saudi
Arabia. Retail financing accounts for 65% of the bank’s financing assets and
approximately 70% of net income. The growth in current accounts can be attributed to
factors such as strong branding and wide distribution channels. The bank expects new
opportunities in retail accounts because of the government’s initiatives on local job
creation including Saudization in the private sector. The bank has also introduced
more than 100 ladies’ branches as the trend of females joining the workforce is
increasing. The bank also focuses on mortgage financing.

According to the Global Finance Report 2013, sharia-compliant finance is the fastest-
growing area of finance worldwide, with more than 500 financial institutions (Fis)
providing Islamic financial products. According to Beirut-based Union of Arab banks,
Saudi Arabia’s Al Rajhi Group was the world’s largest Islamic bank in 2011.

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Products and services offered by the bank:

All of the products and services offered by the bank are sharia-compliant products.
The four main business segments of the group are Retail, Corporate, Treasury and
Investment services, and Brokerage. The financing needs of the retail and corporate
sectors are met through five sharia-compliant product groups, namely Corporate
mutajara, installment sale, murabaha, credit cards, and Istisnaa. In 2012, net financing
accounted for approximately 64% of the consolidated total assets of the group. In
2012, investment sale was the largest financing product, which accounted for three
fourths of net financing followed by Corporate Mutajara. Personal financing was the
largest contributing sector to the growth in the bank’s net financing portfolio. The
Corporate segment offers a wide range of sharia-compliant products such as working
capital finance, trade finance, cash management, and term financing for the corporate
sector including small and medium enterprises (SMEs). The three major areas of
corporate banking business are Fis, cash collections, and trade. The Treasury
segment operates in both local and international foreign exchanges and money
markets to source funding and make investments. Al Rajhi deals in more than 40
currencies. Al Rajhi Bank has partnerships with approximately 180 corresponding
banks. These partnerships facilitate correspondent banking businesses, remittance
needs, or funding of short-term needs. Cash collections are basically in terms of fees.
The bank has 162 remittance or Tahweel Al Rajhi centers, which have a wide network
of correspondent banks.

Investment banking, advisory services, brokerage, and asset management are

provided through Al Rajhi Capital Company (ARC), a wholly owned subsidiary of Al
Rajhi Bank. ARC is one of the top-five asset managers in Saudi Arabia offering mutual
funds. In 2012, the Al Rajhi MENA Dividend Growth Fund was established. ARC is a
major player in the brokerage market of Saudi Arabia. It offers trading in major GCC
and international stock markets and sukuk by means of a number of channels such as
telephone, Internet services, automated phone trading, and specialized central trading
units. ARC’s Investment Banking division offers strategic advisory services for fund
raising and debt/corporate restructuring. In 2012, ARC carried out deals worth $4
billion. Al Rajhi was the first bank in Saudi Arabia to offer mobile share trading in Saudi
Arabia. The bank also launched the Web 2.0-based online banking (Al Mubasher) as
a strategic initiative to attract young customers. The group offers takaful services in

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automobile, health, home, personal services, and travel. A major portion of retail
financing is funded through current accounts, which are long-term deposits. The major
sources of revenue are obtained through retail banking, corporate banking, and other
sources. Retail banking generates retail processing fees, which are driven by retail
financing. Corporate banking generates fee-based income on account of corporate
restructuring, arranging deals, and granting loans. Other sources include remittance
businesses, trade, and credit cards. The bank’s cost-to-income ratio has averaged in
the range of 26-28% during the last few years. The nonperforming loan ratio was 2%
in 2012.

Al Rajhi in Malaysia:

Following 50 years of activity exclusively inside Saudi Arabia, the bank propelled a
Malaysian backup, connoting its first foray into global banking, in October 2006.
Following the Saudi business model, which adheres closely to deeply rooted Islamic
banking principles, the shariah-compliant banking group is planning to be instrumental
in bridging the gap between modern financial demands and intrinsic Islamic values to
meet the growing needs for Islamic financing in Malaysia.

Al Rajhi Malaysia extensively uses the latest banking technology to consistently

provide customers with speed and convenience in banking. It opened its first and main
branch in Kuala Lumpur on the October 16, 2006. Today, it has 24 branches, 15
around the Kuala Lumpur area and one each in Johor Bharu, Melaka, Penang,
Kuching, and Kota Bharu. Al Rajhi has a customer base of more than 100,000, and
the numbers are steadily growing. Al Rajhi has the official vision to be “a trusted leader
delivering innovative financial solutions to enhance quality of life everywhere.” Its
mission is “to be the most successful bank admired for its innovative service, people,
technology, and shariah-compliant products, both locally and internationally.” Despite
the growth of Al Rajhi over the past five decades, the bank is committed to adhering
to its core values and customer-centric approach, which puts the customer at the heart
of all banking activities. The core values are:

Integrity and transparency: Openness and highest standards of corporate and

personal ethics.

Passion to serve our customers: A strong commitment to anticipate and address

customers’ needs beyond their expectation.

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Solution oriented: Helping customers achieve their objectives.

Modesty: Humility in thought and deed in everything we do.

Innovativeness: Nurturing imagination and fostering creativity for better results.

Meritocracy: Defining, differentiating and reinforcing excellence in people.

Care for society: Contributing toward a better tomorrow.

Financial Strength:

Al Rajhi Bank is a financial institution to be reckoned with, due to the following:

 As of December 31, 2007, Al Rajhi Bank has assets totaling $33.298 million
and a net income of $1.720 million.
 Al Rajhi Bank commands a total equity of $6.294 million and a market
capitalization of $48 billion as of December 31, 2007.
 Al Rajhi Bank has the highest profitability among banks in Saudi Arabia,
standing at $1.720 million and offers the best return on equity (ROE) and return
on assets (ROA) in the world at 29.5 percent and 5.6 percent, respectively.
 Financial strength is rated as A by Standard & Poor’s as of May 11, 2007.

In 2009, Al Rajhi Bank’s CEO Sulaiman Al Rajhi announced that the bank posted a
net profit of SR3.503 million, compared to SR3.344 million during the same period the
prior year, representing a 5 percent increase. The growth is attributed to the increase
in customer deposits and the diversification of the bank’s financing and investment
strategy. Al Rajhi explained that the bank is continuing with its conservative strategy
by increasing its financial provisions by 55 percent compared to the same period the
prior year. The financial results for the period ending June 30, 2009, showed that the
net income from financing and investment operations reached SR4.623 million,
compared to SR4.170 million, which represents an 11 percent increase from the
previous year. Total operational revenues reached SR5.641 million compared to
SR5.201 million, representing an 8 percent increase. Al Rajhi indicated that the bank
was successful in diversifying its revenue base and developing the investment and
banking sectors hand in hand with managing customer relationships and meeting their
needs with quality products and services.

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Al Rajhi added that the shareholder value increased to reach SR27 billion, compared
to SR 24 billion during the same period the previous year, an increase of 13 percent.
Assets increased to SR165 billion compared to SR150 billion, representing an
increase of 10 percent. Customer deposits grew by 14 percent, increasing from SR108
billion to SR123 billion. The bank made a return on investment from assets at a rate
of 4.25 percent, whereas the return on shareholder value reached 26 percent. Profits
per share reached SR2.34 compared to SR2.23 representing a 5 percent increase
from the prior year. The board of directors agreed to distribute SR1.875 billion at
SR1.25 per share after deduction of Zakat as half-year dividends for 2009

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SWOT Analysis:

Strengthes:

 Good track record in Saudi Arabia

 Family-oriented business
 Shariah-compliant management team (Shariah board and committee)
 Customer-centric business plan
 Pioneer in Islamic banking

Weaknesses:

 Upcoming competitors (banks with both conventional and Islamic programs)

Opportunities:

 Growing public interest for Islamic banking

 Family-oriented business
 Close relationship with Saudi royals

Threats:

 Upcoming competitors (banks with both conventional and Islamic programs)

Strategy for the future:

As a strategy for the future, Al Rajhi Bank plans to focus on SMEs. The plans involve
rolling out payroll cards, a lockbox system for cash deposits, and the introduction of
social cards such as Haj/Umrah cards for visiting pilgrims. The bank has innovated
sharia-compliant refinancing models for both retail and corporate customers.

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Conclusion:

Al Rajhi Bank, a pioneer in Islamic banking in Saudi Arabia, is marking its presence in
Malaysia with the establishment of many branches throughout West and East
Malaysia. There is at least one branch in every major city in the states of Malaysia. It
is rapidly spreading its wings as it sees the potential of its products and services to be
competitive in the Islamic banking market. It has proven itself to be effective and
efficient in its services, already making a profit by the first half of this year, as
announced by its CEO recently. Carefully monitored by its own shariah board, which
comprises Islamic scholars and experts, it not only inculcates Islamic values in its
products and services but also stresses its management teams, the people behind its
many successes and accomplishments. Justice, honor, and respect are the three key
elements instilled in the bank’s management teams, as it sees these elements as its
most reliable assets in providing good services to its potential customers. The
elements are carefully guided by the company’s vision, mission, and values, which
must be abided by its respective employees.

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References:

1. http://www.gfmag.com/tools/best-banks/12474-worlds-best-islamic-financial-
institutions-2013.html#ixzz2oq5z0svS
2. Global Islamic banking assets set to top $ 1.7 trillion,
http://www.tradearabia.com/news/BANK_247645.html
3. Al Rajhi Bank Annual Report 2012
4. http://www.kfh.com/en/about/investor-relations/annual-report/pdf/KFH-EN-
2012.pdf