The Saudi British Bank


The purpose of this research paper is to discuss the history of the Saudi British Bank (SABB), scope of the bank’s activities and services, ownership, Islamic financial solutions of SABB. However, this paper will scrutinize financial performance of SABB though ratio analysis and financial data analysis including balance sheet, cash flow statement, and income statement; however, financial data analysis will give the opportunity to the bank and shareholders to minimize risk and uncertainty to take decision in the future investment. This report will focus on the following research questions:

  • To what extent financial performance of the Saudi British Bank is satisfactory to sustain in adverse economic condition?
  • To what extent SABB is able to compete with the competitors

Both primary and secondary data sources will use to evaluate financial performance of SABB; however, primary sources include original information and observations, which will be collected from the annual report of SABB, and Bloomberg Businessweek. In addition, this paper will consider secondary data as it supports the information derived from primary data; in this case, authentic sources include website of SABB, the annual report of SABB, relevant books on financial ratio analysis and different report on the selected bank.

Literature Review

History of the Saudi British Bank

SABB is a Saudi Joint Stock Company and an affiliate of HSBC Holdings, which was established in 1978; however, it has strong brand image and a heritage to offer a wide range of personal, commercial, investment and Islamic banking products and services. According to the annual report 203 of this company, SABB provides an attractive employee value proposition to attract, inspire, and retain staff and it has more than 3563 employees; however, the management team had developed excellent working environment for the female staff; in addition, near 16% of the total employees are female. Hasan & Naveed (1) and SABB (9) reported that in the fiscal year 2009 and 2010, SABB had experienced headwinds occurring from probable asset quality deterioration; therefore, net income and total assets declined by 30.4% and 3.4% accordingly in 2009. From the fiscal year 2011, the financial position of this bank has developed significantly for taking appropriate measure in the adverse business environment in the global market due to global financial crisis; however, the following figure shows the key financial highlights of this bank-

Five-year financial highlights of The Saudi British Bank
Figure 1: Five-year financial highlights of The Saudi British Bank
Income Performance of the Saudi British Bank
Figure 2: Income Performance of the Saudi British Bank


SABB is an associate of the HSBC Group and HSBC has a technical services agreement with SABB; in addition, share capital of this bank consists of one thousand million shares and 60% share owned by individual along with institutional shareholders, mostly citizens of KSA; however, the following figure shows share structure more clearly:

The ownership of the Bank’s share capital
Figure 3: The ownership of the Bank’s share capital

To what extent SABB is Islamic bank

According to the annual report 2013, this bank has designed all main products complying features of Islamic (Shariah) compliant products; however, it has about 97 branches in national market among these eighty-one outlets exclusively provide Islamic financial solutions; in addition, ninety-two percent of its total Retail Banking assets has generated from Islamic financial products.

Scope of the bank’s activities and services

SABB has introduced multidimensional banking system both for personal and commercial banking and by integrating secured Internet banking software it generated enough customers confidence for its easiness and convenience application. With the ideological framework of Islamic financing the bank has integrated SABB Premier a complete solution for personalized banking globally, SABB Advance, credit card, Debit Cards Cash deposits and SMS notification, Initial Public Offerings or Rights Issues, Charity donations, ATM withdrawals from local and worldwide retail outlets. Its personal financing solution incorporated Shariah compliance regulations that customers could utilize for housing property purchase, wealth management, investing in the share market or mutual funds with full support, and guidance for safe investment, travellers cheques facilitates customers easy encashment globally and the bank is committed to provide one to one service to every customers.

By coordinating with the strong network of global partner, SABB serves its customers with advanced banking solution for Internet banking with secure and convenient application, where customers could buy, purchase, and made payment through online along with e-Bill Payment, Safe Deposit Lockers, NRI Services, Mobile Banking Services, and such information technology integrates services are branded as SABBNET with enhanced popularity. At the same time, SABB introduced most innovative produces for commercial banking ‘Kafalah Programm’, ‘Business SABBNET’, Credit Card for business, credit facilities for commercial firms, and so on with the objectives to make the banking service as easy as possible with required measures of security and generate high level of customer satisfaction. However, the following table gives more information about its activities and services:

Table 1: Key activities and services of SABB

Commercial Banking SABB Commercial Banking (CMB) is a market leader of this sector, which holds about 13% market share; however, it has about 26000 customers (loans of more than SAR 60 billion) and it generates revenues of SAR 1.9 billion; it supports an “Islamic Financial Services” approach to serve corporate clients;
Global Transaction Banking SABB is a market leader in transaction banking and it plays vital role in serving the trade and supply chain,
Islamic Financial Services (IFS) All Retail Banking and Wealth Management activities offered to customers have now become Shariah-compliant; growth rate of IFS sector was 65% in 2013;
Treasury It continues to make good progress and boost its market share by offering both Shariah-compliant and conventional hedging along with investment solutions
Segmental net income of the Saudi British Bank
Figure 4: Segmental net income of the Saudi British Bank

Data Collection

Financial data on the Saudi British Bank has collected from annual report 2013 of SABB, Bloomberg Businessweek and Google Finance; however, this data would be used in the next chapter to analyze financial ratio of SABB.

Balance Sheet Analysis

In accordance with the annual report of SABB (55), total assets had increased by SAR 20649863 thousands from 2012 to 2013 while total liabilities had enlarged by SAR 17882571 thousands in this time; in contrast, shareholders’ equity had amplified by SAR2767292 thousands; however, the following figure gives more information in this regard:

Balance Sheet Statement of SABB from 2012 to 2013
Figure 1: Balance Sheet Statement of SABB from 2012 to 2013

Income Statement Analysis

According to the annual report of the Saudi British Bank, total special commission income had increased by SAR 386153 thousands from 2012 to 2013 while net operating income has boosted by SAR 648901 thousands in this period; at the same time, aggregate income had increased by SAR533494 thousands. SABB had experienced better financial result in overall business operation since total operating expenses had not increased significantly, for instance, it was boosted by SAR127347 thousands from 2012 to 2013; however, the following figure gives more information in this aspect:

Income Statement of SABB from 2012 to 2013
Figure 1: Income Statement of SABB from 2012 to 2013

Cash Flow Statement Analysis

In accordance with the annual report of SABB (55), net cash used in investing activities had increased by SAR 4591338 thousands from 2012 to 2013 while total cash from operating activities had enlarged by SAR 4162679 thousands in this time; in contrast, Cash and cash equivalents at end of the year had amplified by SAR 89919 thousands. However, the following figure gives more information in this regard:

Cash Flow Statement of SABB from 2012 to 2013
Figure 1: Cash Flow Statement of SABB from 2012 to 2013

Data Analysis

This part will analyze liquidity, profitability, and activity ratios of SABB.

Current ratio

Table 2: Current Ratio analysis of SABB

The Saudi British Bank 2013 ($ millions) 2012 ($ millions)
Current assets 31,937.9 31,336.2
Current liabilities 144,923.5 129,996.9
Total current ratio = current assets/ current liabilities 31,937.9 / 144,923.5 =
31,336.2 / 129,996.9 = 0.24105

Current ratio analysis is one of the most comprehensible and rapid assessment of business’s liquidity as it measures whether or not an organization has sufficient resources to reimburse its debts; here, it is significant to note that current ratio of SABB was 0.22 and 0.24 in 2013 and 2012 respectively, which indicates that SABB may have difficulty meeting current obligations. It is significant to note that liquidity position of SABB has destabilized from last two years for which it should concentrate on the monetary dependability and realistic solvency to face external challenges.

Net profit margin

It is one of the most essential features for deciding the position of an organization as it incorporates all the factors that influence profitability; however, the following table shows that net profit margin is higher, which indicates that SABB has financial efficiency at converting sales into actual profit; in addition, management of this bank has kept its operating-costs in control.

Table 3: Net profit margin of SABB

The Saudi British Bank 31 Dec 2013 (SAR million) 31 Dec 2012 (SAR million)
Net Income 3,773.8 3,240.3
Sale Revenue 5,373.4 4,727.5
Net profit margin =
(EBIT / Sale Revenue) x 100 =
Net income / revenue
(3,773.8 / 5,373.4) x 100 = 70.23 (3,240.3 / 4,727.5) x 100 = 68.54

Return on assets (ROA)

Table 4: Return on assets of SABB

The Saudi British Bank 31 Dec 2013 (SAR million) 31 Dec 2012 (SAR million)
net income before interest and tax 3,773.8 3,240.3
total assets 177,302.2 156,652.3
Return on total assets (ROA) = net income before interest and tax / total assets ((3,773.8 / 177,302.2) x 100 = 2.1285 (3,240.3 / 156,652.3) x 100 = 2.0685

The table above shows the Return on Assets ratio of the Saudi British Bank; it is important to state here that according to Arnold (55), ROA determines the competence of the company in terms of employing its assets to engender net-income; to be precise, ROA can be said to be a profitability ratio. ROA illustrates the amount of cents received on each dollar of assets; therefore, elevated ROA illustrate that the company is more lucrative; however, ROA must only be used to contrast rival firms in a market because rival firms are most asset-numb; moreover, a rising drift of this ratio illustrates that the wealth of the firm is progressing. It is notable that Saudi British Bank’s ROA has increased in 2013 in comparison to the previous year; this is a very positive sign for the company because a rising ROA denotes the opulence of the company and the ROA of the rival firms were not sufficiently convincing.

Return on capital employed (ROCE)

Table 5: ROCE of SABB

The Saudi British Bank 31 Dec 2013 (SAR million) 31 Dec 2012 (SAR million)
Total assets 177,302.2 156,652.3
Current liabilities 31,937.9 31,336.2
(Total Assets / Current liabilities) 145364.3 125316.1
EBIT 3,773.8 3,240.3
ROCE = EBIT/ (Total assets – current liabilities) x 100 (3,773.8 / 145364.3
) x 100 = 2.5961
(3,240.3 / 125316.1) x 100 = 2.5857

It is essential to state that this ratio will calculate to how proficiently a business could engender income from resources exploited through the means of contrasting net-operating profit to capital employed; to be precise, this ratio would illustrate investors how much money in proceeds each dollar of resources exploited produces. Arnold (59) has pointed out that return on capital employed is a very popular ratio and most investors refer to it before deciding to invest in a firm, in order to make sure that the firm is of competitive health and wealth. Because of this reason, it is greatly flattering for any corporation to have an elevated ROCE ratio and in case of Saudi British Bank, it has been noted that there has been a slight increase in this ratio, which indeed is a positive sign for the bank from all aspects.

Asset turnover

Table 6: Asset turnover of SABB

The Saudi British Bank 31 Dec 2013 (SAR million) 31 Dec 2012 (SAR million)
Sales revenue 5,373.4 4,727.5
Total assets 177,302.2 156,652.3
Total assets turnover ratio = sales /total assets 5,373.4 / 177,302.2 = 0.030306 4,727.5 /156,652.3 = 0.030178

This is a competence ratio, which determines a firm’s capacity to engender sales from assets by contrasting net-sales with average total-assets; to be frank, it indicates how proficiently a firm is able to utilize the assets to engender sales; as a result, an elevated ratio is for all time very encouraging. In this context, if the Asset turnover ratio is one, this would indicate that the net sales of the firm is equivalent to the standard total assets for the annum, that is the firm is producing one dollar of sales for every dollar spent in the assets; however, in case of SABB, it would seem that the ratio is appalling. Even though it is true from an apparent point of view, keeping in mind that it is less than one, it must be noted that in contrast to the other rival banks operating in the same industry, this ratio is enough satisfactory.

Debt/Worth Ratio

Arnold (75) stated that this ratio indicates overall financial position of the company, and high of this ration means high risk to meet obligations; however, the following result of SABB demonstrates it has low financial risks at present to operate business in the local and international market;

Table 7: Debt/Worth Ratio of SABB

The Saudi British Bank 2013 ($ millions) 2012 ($ millions)
Debt/Worth Ratio = Total Liabilities / Net Worth 144,923.5/ 22,832.80 = 6.347162853 129,996.9/ 20,065.50 = 6.478627495
Total current liabilities 144,923.5 129,996.9
Net Worth 22,832.80 20,065.50

Net Worth

Table 8: Net worth of SABB

The Saudi British Bank 2013 ($ millions) 2012 ($ millions)
Total Assets 177,302.2 156,652.3
Total Liabilities 154,469.4 136,586.8
Net Worth = Assets – Liabilities 177,302.2 / 154,469.4 = 22,832.80 156,652.3 / 136,586.8 = 20,065.50

Debt Equity Ratio

Arnold (75) stated that debt-equity ratio measures the extent of a firm’s leverage; here, SABB is a major market player of the Saudi banking industry and it operates with lower financial risks and leverage; however, the following table gives the result of data:

Table 9: Debt/Worth Ratio of SABB

The Saudi British Bank 2013 ($ millions) 2012 ($ millions)
Debt equity ratio = total liabilities / total shareholders’ equity 154,469.4 / 22,832.8 = 6.765 136,586.8 / 20,065.5 = 6.807
Total liabilities 154,469.4 136,586.8
Total shareholders’ equity 22,832.8 20,065.5

Performance of the Competitors

The following figure shows that SABB generated the highest profit in 2013 while the competitors of SABB, for instance, Arab National Bank, Saudi Hollandi Bank and Al Rajhi Bank will able to maximize their profit margin in the future; however, the following figures give more details about profit growth rate, cost efficiency and ROAE of Saudi banking sector.

Profit growth rate and cost efficiency rate of SABB and its competitors
Figure 7: Profit growth rate and cost efficiency rate of SABB and its competitors
Return on average equity (ROAE)
Figure 8: Return on average equity (ROAE)

Share price of SABB

From the fiscal year 2013, the stock price of SABB had increased notably in the stock market and it was able to restore its financial position; on the other hand, it faced severe challenges from the fiscal year 2010 to 2012 (Bloomberg Businessweek 1); the next figure shows share price of SABB:

Stock Price of SABB from 2010 to 2014
Figure 9: Stock Price of SABB from 2010 to 2014

At the same time, it is significant to mention that share price of the main competitors of SABB is competitively lower or slightly higher, such as, Samba Financial Group, Riyad Bank, Al Rajhi Bnkg, and Banque Saudi Fransi dominate share market; however, the following chart shows share price of competitors:

Comparison of Stock Price
Figure 10: Comparison of Stock Price


From the results of data analysis chapter, it can be concluded that SABB is on a positive upward trend and the financial position of this bank was in stable position at the time of global financial crisis; however, Islamic financial solutions are the key success factors of SABB. Most importantly, secondary data sources and ratio analysis of this bank demonstrated that at present, it operates in a high efficient environment as it has opportunity to invest in a new sector, and introduce new financial products and services for the customers and gain competitive advantages over the competitors.

Works Cited

Arnold, Glen. Corporate Financial Management, London: Pearson, 2012. Print.

Bloomberg Businessweek. The Saudi British Bank (SABB:Saudi Arabia). 2014. Web.

Google Finance. The Saudi British Bank (TADAWUL:1060). 2014. Web.

Hasan, Faisal. & Naveed Ahmed. Saudi Arabia Banking Sector. 2013. Web.

SABB. Annual report 2013 of Saudi British Bank. 2013. Web.