Saudi Banks Face Risk From Asset Liability Mismatch, Alinma Says

Saudi Arabia’s banks face the biggest risk from a maturity mismatch between assets and liabilities and need to find “creative” ways to bridge the gap, the chief executive officer of Alinma Bank (ALINMA) said.

The mismatch needs to be monitored and can be bridged by issuing long-dated securities like Islamic bonds, Abdulmohsen Al Fares, told reporters at a conference in Riyadh today. Some foreign banks cut lending in Saudi Arabia after the debt crisis in Europe which is creating “opportunities for local banks as well as for others like Asian banks,” he said.

Short-term demand deposits make up almost 60 percent of the kingdom banks’ overall deposits, according to data from the Saudi Arabian Monetary Agency. Banks may have to turn to bonds amid the fastest pick-up in lending to the private sector in three years. Loans to private businesses grew 13 percent in the year to March, SAMA data shows.

Saudi Arabia’s banks are benefiting from an increase in government revenue and spending, which will be the highest ever this year, and overall bank lending in 2012 should keep pace with first-quarter loan growth of 10 percent, Al Fares said.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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