Few Saudi bank customers take out personal loans

While the current account penetration in Saudi Arabia’s retail banking sector is high at 98 percent, only 25 percent of consumer banking customers have a personal loan, Morgan Stanley said in a research paper.

The low use of personal debt suggests there is considerable scope for growth in consumer debt, added Morgan Stanley’s AlphaWise survey of 1,000 Saudi consumer banking customers.

Saudis tend to take a conservative approach to borrowing, preferring to save, but appear reasonably comfortable to borrow for large purchases, the survey found.

Bank customers optimistic

Retail banking consumers are still relatively optimistic on the outlook for their finances and the economy, after the recent fall in oil prices and changes to mortgage legislation, Morgan Stanley said.

Over half of respondents say their financial situation has improved in the last year, while only 15 percent say it has deteriorated.

Still absorbing mortgage LTV cap

Nearly six months after the introduction of the minimum 30 percent down payment for new mortgages, the vast majority of bank customers are expecting to obtain home loans on significantly less.

Our survey suggests that roughly 15 percent of personal loans are taken to supplement home down payments, while only a third of mortgage holders reckon they are in positive equity.

Payment behaviour seems solid

More Saudis appear to be uncomfortable (about 40 percent) than comfortable (about 30 percent) with the amount of debt they have borrowed.

“That said, our survey also shows that most Saudis appear relatively unperturbed by the fall in oil prices and (51 percent) feel their financial situation has improved over the last year,” Morgan Stanley explained in the research paper.

Payment behaviour seems to be generally conscientious across loan segments with roughly 5 percent admitting to the late payments.

Customer care and ATM/branch networks key

The survey suggests that Saudi consumers rank customer service only marginally less important than trustworthiness and ahead of being Shariah-compliant for their bank of choice.

Physical distribution, branches and ATMs, also remains high up the list of priorities for Saudi customers even if internet banking follows only a short way behind.

“We note that in most cases the larger banks with the strongest brands are perceived to be the strongest in most categories with the exception of customer service — in this area one of the smaller banks, Alinma, clearly scores highest, suggesting the bank has clearly differentiated itself in this core area,” said Morgan Stanley in the research paper.