Foreign ownership and the emerging markets upgrade: Inside IR at Al Rajhi Bank
Founded in 1957, Riyadh-headquartered Al Rajhi Bank has become one of the biggest names in Islamic finance and last year joined 31 other firms in making up the MSCI Saudi Arabia Index as the index provider upgraded the country to emerging market status.
Despite listed companies in the kingdom having a 49 percent foreign ownership limit – something the Capital Market Authority recently said it was considering relaxing due to increased demand – and investments being restricted to qualified foreign investors (QFIs), Amr Sager, director of IR at the Al Rajhi Bank, tells IR Magazine what the company is doing to expand its investor base and the issues investors most want to talk about today.
Can you tell me a bit about yourself, how you got into IR and how your team is set up?
As a graduate in accounting, I started my career in audit with Deloitte. This allowed me to work with clients across a range of industries, which gave me an insight into how different sectors operate. I was offered a role as head of internal audit for a university in Jeddah but, soon after starting, I was approached by Saudi Airlines Catering for the role of chief corporate affairs officer at the time of its IPO – my first IR position.
I rapidly had to learn what IR was, because it remained a new concept in the Saudi market. Since then, I have held senior IR roles in real estate, retail and now in financial services. The IR team at Al Rajhi is part of the finance group, with dedicated officers for financial analysis, peer comparison and benchmarking. We also have a team dedicated to financial reporting.
What elements of your career background do you think have helped you most in this job so far?
Having started my career in audit, and being an accountant by trade, this has allowed me to fully understand the financial aspects of what we do. Having said that, IR is much more than just financials. In fact, the story that is told is far more important.
Working on the IPO for Saudi Airlines Catering was a valuable learning curve. In that role, I also acted as an adviser to the board and senior management, with a focus not just on IR, but also on compliance and corporate governance, so I had to stay ahead of the game on the latest regulatory updates. IROs must be proactive – not reactive – in their role, constantly striving to improve the standards of their company.
What has been your biggest challenge in the role so far? And what about your highlight?
The biggest challenge has been enhancing and growing the IR program through the development of policies and procedures at the bank, and maintaining a high level moving forward – especially after our entry to the emerging market indices.
One of the main highlights has been the support of the senior management team, in particular the CEO and CFO, who have been a privilege to work alongside, and who have helped us to achieve the IR goals we set ourselves. Another highlight was the publication of our 2018 annual report. We have published a compelling and insightful report with high levels of disclosure, in line with international best practice standards – which is not a regular occurrence in the Saudi market. We also initiated earnings calls and webcasts for the 2018 full-year results, something we did again just recently for the first quarter of 2019.
Where have your energies mostly been focused over the past year, and how do you expect that to change over the coming 12 months?
[We have been focused on] meeting as many investors and analysts as possible ahead of inclusion in the emerging market indices. In doing so, we were very busy developing and telling the story of the bank and emphasizing key success drivers and strategies, while at the same time communicating positive results, both financial and non-financial.
In the near term, I expect our inclusion in these indices will broaden and deepen our share register, and that will require a more detail-oriented approach to meeting the very different expectations and requirements of a wide range of investors – in terms of both type and geography.
What are some of the key issues your investors want to talk about at the moment, and how do you go about communicating around these topics?
There had been an ongoing issue around Zakat [a religious levy], which has been there for quite some time, but this was resolved by the end of 2018 [with Al Rajhi reaching an SR5.41 bn ($1.44 bn) settlement with the kingdom’s tax authority].
We have also been delivering continuous updates on strategy – and the achievements of the given strategies – over time. We communicate in accordance with a strict model of transparency and disclosure, while being proactive in terms of answering questions within a minimal timeframe, along with providing regular access to senior management.
Saudi Arabia has been in the geopolitics spotlight in recent months. What impact has this had on your conversations with investors and analysts?
We saw an impact during 2018, but things have now improved and foreign inflows have increased again – in part thanks to our size. Back in April 2018 we had an all-time high QFI ownership of 6.4 percent. Toward the latter part of 2018 we saw that shrink to 3.2 percent, but we are now back at 5.05 percent as of April 2019. We have focused on the macro story and explained the vision of the country, along with the changes that have occurred. We have made the investment community understand the bank’s achievements to date, and as aligned with the kingdom’s vision.
Does your IR program tie in with the wide-ranging Saudi Vision 2030 in any way?
Our IR program is tailored to tie in with the bank’s strategy, which was drafted in late 2015, and which aims to build new capabilities and ensure sustainable growth amid a rapidly changing operating environment, while leveraging the objectives of Vision 2030 for creating a ‘thriving financial sector’. Essentially, Al Rajhi’s future growth and strategy is closely linked to a number of Vision 2030’s core social and economic aims. With regards to our IR program, we have targeted increasing our foreign and institutional shareholder base.
What does your share ownership currently look like? How would you like it to look in five years’ time and what is your plan to achieve that?
Currently 5.05 percent is QFI-owned and 10.2 percent is held by the General Organization for Social Insurance. The remaining holdings are below 5 percent.
Over the next five years, we are aiming for double-digit foreign ownership growth, and a year-on-year increase in overall institutional investors. Our plan for achieving this is to continue to attend international investor conferences and non-deal roadshows, and be proactive in the investment community around the world, with constant senior management access.
Finally, if resources were no object, what would you like to do better or more of?
Deep shareholder analysis to build a detailed and sophisticated understanding of our register – who they are, what their objectives are, what prompts behavioral change, and so on. This would give us valuable qualitative and quantitative guidance on how we should adapt and develop our IR strategy in the future to achieve optimum shareholder composition.