The total bank credit granted to the public and private sectors by Saudi Arabia’s banks reached its highest peak at over SAR2.88 trillion ($766.6 billion) at the end of October 2024. The figure marks an annual growth rate of 12.5 percent or around SAR319 billion, compared to SAR2.56 trillion by the end of October 2023.
The latest monthly statistical bulletin from the Saudi Central Bank (SAMA) also revealed that bank credit saw an increase of about 1.1 percent month-on-month from SAR2.85 trillion in September this year. Since the beginning of the year, bank credit has seen a 10 percent growth from SAR2.6 trillion at the end of January.
Long-term bank credit takes largest share
The report also revealed that credit by Saudi Arabia’s banks spanned over 17 economic activities in both the public and private sectors, further supporting the Kingdom’s comprehensive and sustainable economic growth and contributing to the objectives of Saudi Vision 2030.
Long-term bank credit which spans over 3 years, accounted for 48.2 percent of the total credit granted by banks, amounting to about SAR1.389 trillion by the end of September. Meanwhile, short-term bank credit which spans less than a year, represented 36.7 percent of the total credit by Saudi Arabia’s banks, amounting to over SAR1.05 trillion. Meanwhile, medium-term bank credit (from 1 to 3 years) accounted for 15.2 percent of the total credit, amounting to about SAR437.03 billion by the end of September.
Loans and advances grow
The ten largest Saudi banks reported a 3.7 percent quarter-on-quarter increase in loans and advances, driven by a 4.4 percent rise in corporate and wholesale banking. Deposits grew by 1.4 percent, led by a 4.2 percent increase in time deposits, stated Alvarez & Marsal in its latest KSA Banking Pulse for Q3 2024.
Operating income rose by 6.0 percent quarter-on-quarter, primarily due to a 15.2 percent growth in non-interest income, despite a slight 3.5 percent increase in net interest income. Impairment charges increased moderately by 30.4 percent, while net income grew by 4.5 percent quarter-on-quarter.
“The continued positive performance in Q3 2024 reflects a balance of growth and improved cost efficiencies among Saudi Banks. Profitability has increased primarily due to an increase in non-interest income amid a moderate rise in impairment charges. As the Saudi Central Bank (SAMA) maintains interest rates in line with the U.S. Fed, potential further rate cuts in the coming quarters are likely to affect interest margins.; Focus on non-interest income and improved cost efficiencies, will remain central going forward,” stated Asad Ahmed, A&M managing director, financial services.
Read: Dubai Duty Free reports $1.94 billion in sales by end of November 2024
Saudi banks’ growth prospects
In an earlier report, Fitch Ratings noted that the operating environment for banks in Saudi Arabia remains favorable, with an operating environment score of ‘bbb+’, the highest across the GCC’s banking sectors and the highest score for EM banking sectors scored by Fitch globally.
The operating environment for banks in the Kingdom is underpinned by high oil prices and government spending, supporting the country’s giga projects and the Visions 2030 strategy, and resulting in solid non-oil GDP growth. Fitch Ratings forecasts real non-oil GDP growth to average 4.5 percent over 2024–2025.
The ratings agency also expects banks in Saudi Arabia to continue growing at about double the GCC average rate with financing growth for 2024 projected at about 12 percent. However, lenders will likely increase their appetite for corporate financing, which is likely to make up about 60 percent of new originations in 2024.
