Mrs. Lubna S. Olayan

It gives me great pleasure to introduce the 2022 Annual Report.

Globally, 2022 was an extraordinary year, which saw global economies cautiously emerging from the challenges of the COVID-19 pandemic, while facing the new challenges of growing economic pressures and increasing geopolitical tensions – supply chain issues, the war in Ukraine, and increasing tensions between China and the US. With these conditions creating many uncertainties and challenges, the Saudi economy thankfully weathered the storm well and emerged as one of the few countries in the world showing GDP growth and relatively lower inflation.

Notwithstanding the uncertainties and challenges, 2022 saw SAB accelerate our investment strategy, deliver results on the promise of the enhanced strength of the merged institution, and continue its support of the Vision 2030 transformation programme and related initiatives.

Accelerating our investments…
Delivering on our promises…

2022 has been a year of tremendous progress for SAB.

Our Chief Executive Officer, Tony Cripps and the senior management team announced the Bank’s five-year strategy in May 2021. As we undertook our historic merger, we committed to our customers and Shareholders that the merged institution would be greater than the sum of its parts. So it’s very pleasing to see the level of progress made during 2022 as we made further strategic investments into the business and our people, and already started to see both financial and non-financial metrics evidence the return on those investments.

Our investment in our people is evidenced by the fact that we possess one of the most diverse senior management teams, all of whom are homegrown Saudi talent, ensuring continuity for our customers and other key stakeholders. And I am especially pleased that over a third of our Executive Management are women, a level that I hope will set a benchmark in the Kingdom. Our investments in the business have clearly started to bear fruit. Our investments have enabled us to make significant inroads in capturing mortgage market share while supporting the home ownership goals of Vision 2030 and to accelerate growth across the entire spectrum of our corporate business. These investments have also resulted in improving customer satisfaction, further digitisation, asset growth and ultimately, improved returns. Whilst we understand that there is significantly more to be done, we are very pleased with our progress.

So throughout 2023 we will strive to continue delivering on our promises and supporting our customers and clients, while facilitating progress towards the goals of Vision 2030.

Supportive operating environment

The Kingdom has witnessed a significant recovery from the effects of the COVID-19 pandemic, aided by a range of proactive policies introduced by the government to ensure mediumand long-term fiscal sustainability. Over the course of 2022, these actions have resulted in a return to pre-pandemic levels of economic and social activity.

Oil prices increased during 2022 and global benchmark rates rose rapidly, with the Kingdom following the hikes implemented by the US Federal Reserve. Credit demand has not dampened and we have seen increased activity in all of the ‘giga’ projects. Driven by the construct of our balance sheet, with the majority of our loan portfolio being on a floating rate basis, revenues increased significantly during 2022 resulting in improved returns.

Looking ahead to 2023, the government budget for 2023 expects GDP growth of 3.1%, which despite being slower than 2022 still represents one of the faster-growing economies in 2023 globally. At a global level, many regions and countries are witnessing economic slowdown and recessionary fears, but the Kingdom remains well-equipped to manage these external challenges, while internal activities focused on the key transformational projects continue.

Performance against our strategic objectives and sustainable financial performance

We are in the second year since launching our revised Strategy 2025, and the end of 2022 is a good time to evaluate our performance. Our long-term strategic goals aim to reinforce SAB’s position as a leading bank in the Kingdom, grow market share and deliver sustainable returns to our Shareholders. The Bank targeted a series of financial targets, including revenue and loan growth, improved cost and capital efficiency and, finally, improved return on tangible equity. Although these targets were set for 2025, it’s been extremely pleasing to see progress made across all of these metrics during 2022.

We continue to play our rightful part in the key Vision 2030 projects, including participation in NEOM-related investments, Diriyah Gate and our ongoing support of the Red Sea tourism-related development. Our involvement doesn’t stop at the project level, but continues down the value chain of all these projects. During the year, we commenced our investment journey in the MSME segment, which has already started to have a positive effect, in terms of acquiring new customers and increasing loan balances.

Within our retail business, we are increasingly seeing the benefits of our strategic investment in the mortgage area during 2021, which resulted in over 50% growth in mortgage originations during 2022. Through collaboration with HSBC, we launched Global View Global Transfer (GVGT), a digital tool that enables SAB customers to link their SAB accounts to their HSBC accounts globally, allowing for instant transfers.

These examples across the retail and corporate businesses showcase our universal banking offering, and show how our strategy is firmly linked to the Kingdom’s Vision 2030.

While pursuing that strategy in 2022, the Bank delivered 9% loan growth with a closing loan portfolio of SAR 189.1 bln, 15% deposit growth with customer deposits closing at SAR 214.3 bln and 15% growth in total assets where we ended the year at SAR 314.5 bln. We generated SAR 9.7 bln of total operating income during 2022 which represented 26% growth year-on-year and a 3.7ppt expansion in return on tangible equity to 11.5% for 2022.

As a result SAB has proposed a final dividend of SAR 0.74 per share for the second half of the year, bringing the total dividend relating to 2022 to SAR 2.7 bln in total.

Importance of Environmental, Social and Governance (‘ESG’) factors for SAB

future will take time and significant effort, and SAB is committed to supporting our clients and the Kingdom on this journey. Our strategy is aligned to Vision 2030’s sustainability commitments, with the ambition to achieve Net-Zero carbon emissions by 2060. It offers huge potential for the entire banking sector to help customers transition to a more sustainable operating mechanism and environment. Later in this report we provide a summary of our initial commitments on ESG. Our ESG strategy is organised around three pillars focusing on: (i) supporting our clients and their transition journeys, (ii) playing a leading role to shape a more inclusive and diverse society and, lastly, (iii) a commitment to a higher standard of governance, integrity and responsibility in all decision-making.

It has been especially satisfying to see real progress in implementing our ESG strategy during 2022, following an intense phase of planning, across a wide range of activities – from building up knowledge in the organisation to developing bespoke sustainability-linked products.

One of the most pleasing aspects has been the advocacy SAB has demonstrated in relation to ESG by supporting the Saudi Green Initiative Forum during the Global Climate Summit in Egypt in November. We were awarded the ‘Best Bank for Sustainable Finance in Saudi Arabia’ by Global Finance – further testament to the progress SAB has made in 2022, and we remain confident of achieving a sustainable future, having made such a strong and focused start.

ESG is completely woven into our Strategy 2025, but we also appreciate that transitioning towards a Net-Zero future will take time and significant effort, and SAB is committed to supporting our clients and the Kingdom on this journey.

During 2022 we undertook a complete top-down review, including the organisational design of the governance framework at the Board and management committee level, to the individual controls and frameworks in place to govern how teams and functions operate.

In the spirit of continual improvement, we will of course work through any suggested recommendations. Our focus on improving our corporate governance framework is continuous, as we strive to be consistent with and, whenever possible, even ahead of regional and international best practice.

Following the approval of the election of the Board at the ordinary general assembly held in late December of 2022, the Bank now has five independent Board members, which exceeds the regulatory requirement. The Board has also established a new Technology and Digital Committee to drive the Bank’s digital transformation strategy, and appointed an independent female chair to lead this committee, adding further diversity to our ranks.

Looking ahead to 2023

We enter 2023 in a strong position, with sustained balance sheet growth, a continued focus on implementing our investment strategy, and an aim to further digitise both internal processes and customer experience. With higher policy rates our revenue base should build on the strong foundations laid in 2022. So SAB is well positioned to pursue its strategy and further leverage the benefits of the merger and the additional investments we have made more recently.

With thanks

In closing, I would like to thank our customers and Shareholders for their confidence and trust in SAB, our management and staff for their loyalty, hard work and dedication, and my colleagues on the Board for their professionalism, diligence and leadership. We are equally grateful to the Saudi Central Bank, the Capital Markets Authority, the Ministry of Finance and all the other government agencies for their continued support and direction.

Finally, I extend a special note of thanks to HSBC, with whom SAB’s longstanding relationship continues to go from strength to strength. SAB’s linkage through its relationship with HSBC to a wider international banking network for our customers and clients is unparalleled. And both SAB and I personally are especially grateful for the commitment HSBC has shown to supporting Vision 2030 initiatives and the Kingdom as a whole. I look forward to even further collaboration between us in what promises to be a successful and fulfilling 2023.