Research Paper on History of Riyad Bank

Introduction

Riyad Bank is one of the companies listed on the Saudi Stock Exchange. It is among the most significant institutions offering financial services in the Kingdom of Saudi Arabia and the Middle East. The company was established in 1957 with a capital of 30 billion SAR. The company is ranked number three in terms of the assets with 51 percent of the shares of the firm owned by the government. The Monetary Agency of Saudi Arabia regulates it.

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To ensure that customers do not lack any services that they may require Riyad ensures that they offer all types of banking services. The second strategy adopted by the firm is image building which makes it a famous and unique brand not only in Saudi Arabia but also in the Middle East (History of Riyad bank, 2014). To ensure that they can finance both the retail both the customers requiring a small amount of fund as well as corporate businesses the firm has an asset base that is already established and they have a strong financial position. This is very advantageous to the firm as it can finance companies requiring a huge sum of capital such as those dealing with crude oil. To stand out from the competitors, the firm has recently managed to offer huge dividends.

In 2008 Riyad Capital which is owned by Saudi Bank was approved by the Saudi Capital market Authority to operate as a Closed Joint Stock Company. The relationship with the Bank has made the company have a strong corporate and banking background. The firm, therefore, enjoys the expertise of the bank, the substantial capital as well as the experience of the Riyad Bank (History of Riyad bank, 2014).The firm offers a variety of services all of which comply fully with the Sharia law. The services are geared towards meeting the needs of corporate as well as retail customers. The employees of the company are professionals thereby making the fulfillment of the company objectives a less complicated task. The firm has approximately 5,600 employees' makes the firm among the companies with the largest national employment rate which is at 93 percent.

The Riyad Capital with the help of the bank has a unique strategy that makes it have an advantage over its competitors. First, the firm helps businesses to develop which means that for anyone who wants to get established in the business then Riyad is the best option. This strategy helps in attracting and retaining customers. The bank acknowledges that the customer is the most valuable asset for the business. For this reason, they launched a Data Center to ensure that the information of the clients' is fully protected. The center meets all the international standards, so it is also beneficial in helping in ensuring quality and improving performance.

One of the important strategy adopted by the company in regard to customer satisfaction is 'Enriching Customers' Experience.' Through this program, customers get innovative products and services that are unique from those of the competitors (History of Riyad bank, 2014). The firm as broken the banking monopoly by ensuring that the clients have a unique experience and that the services and products are attractive. Additionally, the bank has ensured that the staff has the right skills for the tasks at hand. This has been achieved through various programs that boost the skills so that they can positively compete in this sector where competition is stiff.

Riyad Bank Performance Analysis

Riyad Bank Liquidity Ratio

Liquidity is the availability of cash that companies use to meet short operating needs to facilitate company activities. Some of the needs of the company are unforeseen; hence the company needs to keep some little cash that it can use to pay for the expenses. The liquidity may be informed of assets that the company can sell when having financial challenges and can make the company resume its operations after dealing with the financial challenges. Liquidity ratio is the ratio between the liquid assets and the liabilities that the company has externally.

The liquidity ratio is conducted regularly to ensure the company knows its financial position. Investors use the liquidity ratio to see whether they can get their money back in case the company is unable to continue with its operations. Banks are required to have their liquidity rations reviewed on a timely basis to ensure that they are viable to continue with their operations.

Liquidity ratio for banks is calculated as Quick ratio = (Cash in Bank + Accounts receivable) / Total current responsibilities.

For example, the liquidity ratio for Riyad bank by December 2018 was as follows (Annual Report, 2018).

Cash in the bank was $120,000

Accounts receivable was $ 80, 000

Total current liability was $200,000

The liquidity ratio of the Riyad bank in 2018 December was (120000 + 80000)/200000 = 1

Riyad Bank Activity

Activity is how the business is performing in terms of running their operations; companies need to run efficiently to earn maximum benefits. Activity is calculated in the form of ration that shows the ability of the business to generate sales. Riyad bank calculates the activity ratio to measure how the services of the bank are efficient, the more the efficiency, the higher the returns. There are different types of activities that their ratio can be calculated. The ratios include merchandise turnover ratio that indicates how the inventory of the bank was sold over a certain period of time.

Total Assets Turnover Ratio is also an activity ratio that measures how the bank is able to use the assets to earn profits. The assets of the company must be used to their full potential because that is their purpose - the activity ratio help in calculating the asset turnover which is calculated using the formula below. Also, the calculation shows the calculations of the asset turnover for Riyad bank (Annual Report, 2018).

Total Asset Turnover = Net sale average total assets

Net sales ($240000) average total assets ($200000) = 1.2

Riyad Bank Leverage

Leverage is the ability of the company to see the borrowed resources effectively to earn maximum benefits. The company risks by borrowing the finances and investing them into its operations hoping that the return on investment will increase. The resources need to be invested in areas that there is a potential return on investment. Return on investment is used to indicate the leverage investment of a company.

Riyad Bank Profitability

Profitability is the ability of the company such as banks to earn a profit after it invests its resources. It reflect the ability of a company to generate earnings. Companies have a lot of expenses that they cover before the company can earn a profit; hence it's not a must for the company to earn a profit. The two categories of profitability ratio include the margin ratios and the return ratios. Margin ratios represent the ability of the company to convert sales into profit while the return ratio is the ability of the company to return a profit to the investors.

Common Stock (Market) Measures

Stock market ratios are the measurement of a section of the stock market; the measurement helps investors in calculating how certain markets are operating when compared to others. Comparing the stock helps the investor to conclude on areas that they need to invest.

References

Annual Report (2018). Financial Results - Annual Reports | Riyad Bank. Retrieved from https://www.riyadbank.com/en/about-us/investor-relations/financial-results.

History of Riyad bank, (2014). Retrieved from https://www.riyadbank.com/en/Images/Riyad-Bank-Annual-Report-2015_EN_tcm8-8037.pdf