Interview with Mr. Faisal O. Al Saggaf, CEO, National Commercial Bank, Saudi Arabia

17 Dec Interview with Mr. Faisal O. Al Saggaf, CEO, National Commercial Bank, Saudi Arabia

Question: Three years into the Crown Prince’s Vision 2030 plan to reduce Saudi Arabia´s dependence on oil by diversifying its economy and developing public service sectors such as health, education, infrastructure, mining, entertainment and tourism. What are the biggest challenges and opportunities that lie ahead in order to achieve the Kingdom’s goals?

In my personal view, I believe that Vision 2030 is something that reflects the aspiration of the vast majority of the Saudi population, particularly young men and women. This is evident in people’s participation in events, women in the workplace, and women driving. The population has experienced tremendous change on the social front, and this is very positive and energizing, and it addresses a lot of the challenges.

We also see growth as the Vision Realization Programs gain traction. Most transformation programs are making solid progress, certainly the Fiscal Balance Program and Housing Program are already seeing very strong traction. I would also highlight the Financial Sector Development Program, which is well ahead of all its KPIs.

We experienced growth throughout 2019 and believe that this growth will continue and accelerate over the next couple of years. The opportunity is significant for the private sector, as well as local and foreign investment. This in turn creates opportunities for the financial sector to support the implementation of this transformation.

This is particularly applicable to some well-established sectors of the Saudi economy, such as energy, mining, manufacturing, logistics, education, healthcare, and housing, and I expect emerging sectors such as tourism, entertainment, hospitality to also experience significant growth.

I am confident that we have a very exciting decade ahead of us.

Question: NCB is one of the leading banks in the region, and of course the dominant bank in the country. What are your thoughts on Saudi Arabia as a potential financial hub of the Middle East?

 My personal view is that Saudi Arabia is the natural financial hub in the region. It is the largest economy in the Middle East, a member of the G20 and a strong regional and international investor.

We are also heavily focused on investment. So, we are going to see a lot of investment flows in and out. And as Saudi Arabia is the biggest economy in the region, it is going to naturally be a market that other regional hubs are going to serve. I think that the reason why we have not emerged as the hub as of yet is because of matters that have not been addressed previously, and which have now been looked at over the past two to three years, whether in terms of legislation, reforms, or the opening up of the economy.

We have recently seen several measures introduced by the government to improve the regulatory framework and attract foreign investors, all of which will pave the way for further expansion and growth. This has all resulted in the inclusion of Saudi Arabia in MSCI EM Index, in addition to the current potential biggest listing in the world with Aramco’s IPO.

Question: Moving on to technology. We have a lot of FinTech companies impacting the digital space and effecting the conventional banking sector. How is NCB adapting into this new landscape and investing in technology?

 I think technology is crucial. Technology and internet go hand-in-hand in the banking sector. Banks process millions of transactions for millions of customers, so we are heavily dependent on technology. As the internet and Fintech become more prevalent, banks have been quick to embrace it so that they can provide people with seamless access and ease of use for everyday transactions.

Banks have been swift in adopting new technologies to compete effectively and offer solutions expected by a young and tech savvy population.

We recently expanded our digital banking platform by introducing self-service kiosks and a fully digitized and paperless account opening solution. We have the highest digital penetration among Saudi banks, with 53% of retail customers using our digital platform in 2018, compared to an average of 33% for the market. Half of our customers today are active on digital and online channels. We have the highest proportions in the industry with 97-98% of our transaction outside of branches.

Question: It’s adapt or die.

Mr. Faisal Alsaggaf: Yes, it’s “innovate or perish”; we are all doing it now. At NCB, one of the main aspirations we set out in 2013 was to become the number one digital bank and a leader in customer experience.

Question: We know that you have around four hundred and twenty plus branches. Does your growth strategy include maintaining these branches or opening more?

Our branches continue to be vital for customers. They play a vital role in providing not only some of the more basic, everyday banking services, but also in offering more complex products. We will continue to add branches so we can extend our reach, but they will be smaller and run more efficiently.

In 2014 we averaged above 14 employees per branch. Today we are below ten employees per branch and we are piloting a new branch that would be run by four people and new technologies to make transactions faster and efficient. While we do this, we also continue to invest to own the best-in- class digital offering to further enhance our customer experience with innovative products and services.

Question: Let us talk about mergers and acquisitions.

 Mr. Faisal Alsaggaf: We are in discussions regarding a potential merger with Riyad Bank.

Question: It is an US$ 182 billion merger (in assets) if it pushes through.

Discussions are still ongoing. The deal is currently subject to a due-diligence exercise, and we are making good progress on that front. Any material developments will be announced in accordance with the disclosure requirements set by local regulatory authorities. In general, financial sector mergers are about achieving synergies, and capturing additional value.

Question: This possible merger is very interesting because you already have the top position in the industry. Tell us the strategy behind this move, or is it purely consolidating your No. 1 position in the market?

Consolidation is a key theme in the banking sector in the Gulf region today. Strong players merge because they see the advantages of doing so. Benefits of economies of scale are becoming particularly important when it comes to investments in technology and expanding regional reach. Prominent examples in the region include the formation of FAB (First Abu Dhabi Bank) and Emirates NBD.

Similarly, throughout history, banks have always merged to create more efficient operations and to achieve synergies.

 Question: NCB recorded over SAR 8 billion of net income after Zakat and Income Tax for the first nine months of 2019, which is a 16 percent increase on the same period last year. Tell us the reasons behind this growth, and do you think this kind of growth is sustainable?

 We have achieved this robust profitability through growth in operating income, primarily for the domestic banking franchise. We are growing the financing book along with prudent management of asset quality, and diligent cost control management.

We are optimistic that our growth is sustainable in line with current economic situation. We see growth in all sectors of the economy. We see that there will be quite a lot of investment, and that will encourage economic activity, which will then trickle down. I am bullish about this growth.

Question: Tell us about the importance of CSR (corporate social responsibility) for NCB, and what are some of your favorite initiatives.

At NCB, CSR is very important, as it not only allows us to give back to the community but also to engage our employees and give them the opportunity to contribute on a personal level, which instills a sense of belonging to the organization.

Our approach to CSR has evolved significantly over the years and goes way beyond offering charitable donations. We took the initiative to design bespoke NCB programs that empower community.

Our productive families program is designed for women and run by women. We train women who want to start their business and through the microfinancing program, we help them start and grow their sustainable business, and sell their products through a partnership with the Saudi Commission for Tourism and National Heritage. We also provide microfinance product to the productive families at no profit margin.

The entrepreneurship program supports entrepreneurs by giving them access to more sources of financing, such as accelerators, and partnership with the Small and Medium Enterprises General Authority “Monshaat”. In this regard, we launched the first FinTech accelerator in the Kingdom.

In addition, we have now a very effective volunteer program, where employees provide pro bono advice to one of these groups in the areas that they specialize in. This is something that is exciting for us. Our people are enthusiastic, and a lot of them volunteer for these initiatives.

NCB as a usual practice evaluate CSR programs yearly and make the necessary amendments & development to ensure effectiveness of this programs, and revisits its CSR strategy every 5 years to ensure that it meets the society needs and to be aligned with National Agenda and bank strategy.

Question: You were educated in Harvard University and have over thirty years experience in the financial sector holding senior management positions. You took over as CEO at NCB in May 2018. When you eventually decide to step down from this position, in perhaps 5 – 10 years time, what at kind of legacy would you like to leave behind, how would you like people to remember your leadership by?

 It really goes back to the aspirations we have – we want to be number one in income and revenues, the best in digital, the employer of choice and the best in customer service. I believe these are the things that we would like to be known for.

Question: It has history. NCB has been around since 1953.

True, NCB is built on a strong legacy of more than sixty-five years and has evolved to become the country’s leading banking group in Saudi Arabia. Our vision is to become the premier financial services provider in the region. We are the largest Saudi bank by assets, financing and deposits. NCB enjoys healthy capital and liquidity ratios, underpinned by a diversified business model. We have the necessary scale to enable the transformation of the Saudi economy and the right platform to partner with international companies and investors to support them in achieving their goals.

I believe we have the best talent in the industry, second to none, but equally important, they are highly engaged in whatever they do. We have a great technology platform and we have great people. That’s a very good combination to have.

Furthermore, we are competitive. We want to be leaders, and we want to be the best. This type of mentality drives you to do better, to innovate, to always continuously improve. I think this is something that is part of our mindset and it compels you to be customer focused because you cannot win if you are not competitive. Finally, I believe we are well governed, and we are agile when it comes to decision making. All of these factors combined made us into the successful financial institution that we are, and my hope is to sustain this.

One of the biggest sources of pride that we have is on the HR side, as we are 97% Saudi. We focus on homegrown talent. We have a very strong youth development program. This is something that we will continue to develop because banks ultimately are only as good as their people. This is the legacy that I would like to keep. A great talent base that is highly motivated, highly effective, customer focused, driven in achieving success, and delivering great returns to our shareholders. I think this is what is called the service industry value chain.

Question: Any final comments to the readers of Newsweek?

 All I can tell everyone is that I think this country has embarked on a great transformation story. I am very optimistic about the tremendous growth and investment opportunities here for investors, businesses and private sectors to participate in what we will be a sustainable growth story for many years to come.

The Vision is for 2030. So much has already been achieved but I believe that the next ten years is when we will experience the effects of the massive acceleration the country has already embarked on. There is a lot of ground work and a lot of preparation that we are experiencing. We are beginning to see pick up, but we still expect growth to accelerate.