al rajhi capital

In a volatile year in which capital markets around the world were measurably impacted by global economic headwinds, the Saudi capital market fared relatively well though not without incident. Al Rajhi Capital (ARC) – the largest broker in the Kingdom, continued to drive its strategic objective to maintain leadership in brokerage during the year under review, reaching 17.6% market share in terms of value traded, driven by a 19% YoY increase in the number of active clients. Pricing was improved and a discount structure was developed through effective campaigns and offers over the course of 2022, adding to ARC’s growing popularity with investors.

The subsidiary pursued multiple deals across all fronts including equity capital markets, debt capital markets, acquisitions as well as a first-of-its-kind Sukuk issuance, capping off the year ranked by Bloomberg as the number one trader in the global Sukuk market for 2022. ARC was also awarded the Best Broker and Best Financial Research House awards for the Saudi Market at the Saudi Stock Exchange Awards during the Saudi Capital Market Forum 2022.

Scaling up asset management

During the reporting period, “Al Rajhi Saudi Equity Fund” saw its performance at 2.76%, despite a -7.1% decrease in the Tadawul All Share Index (TASI) in 2022, and the “GCC Equity Fund’s” performance reaching 5.89% in 2022. Additionally, the newly launched fund “Monthly Distribution Fund” distributed 2.7% monthly dividends during 2022, since its inception on September 4th 2022. Fund was widely and well received, with approximately SAR 300 Mn. invested and 2.18% of dividends distributed so far, with the fund contributing to the total unit subscribers increase by 96% YoY. In mid-2022, the asset management team in collaboration with the Saudi Health Endowments Association launched the Health Endowment Fund, with the aim to promote participation within the voluntary community, particularly within non-profit investment, thus creating an effective contribution to social solidarity.

For its strong fund performance, the Al Rajhi GCC Equity Fund was named the Lipper Fund Award winner for Equity GCC (Gulf Cooperation Council) over the three- and five-year periods in the MENA Markets category, the MENA Markets Domestic Funds category and the Global Islamic Fund category.

ARC also claimed compliance with the Global Investment Performance Standards (GIPS®), established by the Institute of Chartered Financial Analysts (CFA Institute), responsibly guiding the local financial sector as a pioneer in implementing global benchmarks for disclosure of the performance of Asset Management investments during the year under review.

A strong foundation for an investment banking franchise

When expanding advisory services to strengthen its investment banking portfolio in line with its strategic direction, ARC pursued several opportunities within the capital markets; the subsidiary was the sole financial advisor, lead manager, bookrunner and underwriter for the SAR 1,247 Mn. IPO of Al Masane Al Kobra Mining Company (AMAK) in the first quarter of 2022, and also served as advisor for a mega government project falling under the Kingdom’s Vision 2030 strategy. ARC’s advisory role was also sought in a number of debt market transactions as joint lead managers, most notably by Bahri – the National Shipping Carrier of Saudi Arabia, the government of Sharjah, and a number of other deals inside as well as outside the Kingdom.

In order to maintain the its leadership position in investments, the subsidiary also established an International Investment Department during the reporting period, seeking to further activate the diversification of international investment products within the company, and increase alternatives for investors.

Further nurturing corporate synergies between the Al Rajhi Group, ARC assumed the role of financial advisor in Al Rajhi Bank’s acquisition of Ejada Systems (refer page 81), a regional leader in ICT solutions. ARC was also appointed as the sole financial advisor and lead manager to Al Rajhi Bank’s publicly-listed SAR 10 Bn. Tier-1 Sukuk issuance, with coverage reaching nearly 300% to exceed 125,000 subscribers. As a result, Al Rajhi Capital was the number one trader in the global sukuk market in 2022, as ranked by Bloomberg.

Strengthening the Kingdom’s diversifying economy

On the real estate front, ARC entered into several agreements to establish real estate private funds and solidify its leadership in the sector. Chief among these was a tripartite agreement to establish a SAR 1.5 Bn. investment fund with the Tourism Development Fund (TDF) and Ennismore, the world’s largest and fastest growing hospitality company, to provide financing for hospitality projects across the Kingdom, and contribute towards positioning tourism as a key driver of Vision 2030 and a diversified economy.

Al Rajhi REIT – the subsidiary’s first Real Estate Investment Traded Fund saw an increase in its dividends per share for the second half of 2022, followed by an announcement of a policy change for distributing cash dividends from semi-annual to quarterly, starting from the first quarter of 2023.

Digital developments

With ARC’s ambitious digital transformation targets for 2022, and the significance of their timely development for the subsidiary’s business, ARC appointed a Chief Digital Officer among other talent recruitments to establish a digital department at ARC in 2022, to manage and implement all digital initiatives in line with ARC’s digital transformational strategy.

Most notably, the subsidiary initiated the development of a customer-facing mobile super-app that, upon launch, will see all of ARC’s products and services brought onto a single platform, effectively and efficiently enhancing its client experience. This initiative has been supported by heavy investments by ARC across its IT and digital infrastructure, ensuring seamless integration and connectivity across multiple back-end platforms and functionalities.

The mutual funds feature on the primary Al Rajhi Bank (ARB) mobile app was further enhanced in 2022, supporting the 96% YoY increase in total unit subscribers. Clients were also able to view their Tadawul portfolios and monitor the performance of each individual stock natively on the ARB app. All technology and digital enablers implemented throughout the year resulted in over 89% of all trading being carried out on electronic platforms.

By the end of the reporting period, with the development of its new brokerage and asset management platforms going according to schedule, ARC began exploring options to develop and upgrade a few more systems, including its customer relationship management (CRM) system and management information system (MIS), to enhance overall client servicing and operational efficiencies.