Saudi’s top 10 banks post 3.8% rise in profits

Reuters/Faisal Al Nasser

Saudi Arabia’s 10 largest listed banks saw net income rise 3.8 percent to SAR18 billion ($4.8 billion) in the third quarter of 2023, driven by higher loan growth and interest income. 

In light of the Saudi Arabian Interbank Offered Rate (Saibor) increasing by 13 basis points in the third quarter, aggregate total interest income increased by 14.4 percent during the quarter. 

The Saudi riyal pegs its currency to the US dollar, and the Saudi central bank has continued to increase interest rates in tandem with the US Federal Reserve.

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In addition, net impairment costs fell by 18 percent compared to the second quarter, professional services consultancy Alvarez & Marsal (A&M) said in a report published on Sunday. 

The growth in net income resulted in return on equity increasing to the highest level since the pandemic of 16.4 percent – equivalent to a rise of 70 basis points – while return on assets remained stable at two percent for the quarter.

The loan-to-deposit (LDR) ratio improved by 2.3 percent quarter-on-quarter on the back of higher loans and advances growth, which reached 98.4 percent, representing the highest level seen in the last four years.

A&M anticipates moderate credit growth in the fourth quarter of 2023. Saudi banks are increasingly turning to medium-term borrowing to address the liquidity constraints resulting from high loan-to-deposit ratios and this is likely to affect their net interest margin. 

“However, the diversification of the non-oil sector such as trade, hospitality and tourism, coupled with ongoing government spending, positions the kingdom well for a positive economic counterbalance,” said Asad Ahmed, managing director and head of Middle East financial services at A&M. 

“While Sama continues to follow the US Fed on the policy of hiking rates, there are no visible signs on asset quality, and Saudi banks remain well capitalised.” 

The country’s 10 largest listed banks analysed in A&M’s Saudi Banking Pulse are: Saudi National Bank (SNB), Al Rajhi Bank, Riyad Bank (RIBL), Saudi British Bank (SABB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Bank Albilad (BALB), Saudi Investment Bank (SIB) and Bank Aljazira (BJAZ).