Saudi Arabia’s Banking Sector Sees Growth in Loans
In a noteworthy development, loans by Saudi Arabia’s banking sector surged to SR2.72 trillion ($726.44 billion) in May, marking an impressive 11.14 percent annual increase, according to official data released.
Corporate Credit Outpaces Personal Loans
Data from the Saudi Central Bank, also known as SAMA, revealed that corporate credit, constituting 53 percent of the total lending in the month, experienced higher growth rates compared to personal loans, making up the remaining 47 percent.
Mortgage Lending Driving Sector Expansion
A recent report by McKinsey highlighted mortgage lending as a key growth factor in the expansion of the banking sector in the Kingdom, despite high interest rates.
Growth Opportunities Abound for Saudi Banks
With high oil prices, government economic diversification efforts, increased government spending, and robust non-oil GDP growth, substantial growth opportunities are being created for Saudi banks, as per Fitch Ratings.
Regional Banks Impacted by Mortgage Market Developments
Gulf Cooperation Council governments are actively promoting homeownership and enhancing residential finance, impacting regional banks’ retail loan portfolios as part of a broader trend aimed at developing mortgage markets.
Digital Payments and Fintech Driving Global Banking Growth
Globally, banking growth is being fueled by digital payments and fintech innovations, with artificial intelligence set to revolutionize banking and asset management in advanced economies, according to industry experts.
Breakdown of Loan Categories
Personal loans, totaling SR1.29 trillion, saw a 7.3 percent year-on-year growth, while corporate loans for real estate activities, wholesale and retail trade, and manufacturing activities showed varying growth rates and shares of total lending.
Infrastructure and Energy Projects Driving Financing Demand
Recent initiatives in the infrastructure and energy sectors, such as the Saudi Electricity Co.’s capital expenditure program and the world’s largest renewable energy survey, are expected to spur demand for financing across various projects in the Kingdom.
Specialized Activities Witnessing High Growth
Lending for professional, scientific, and technical activities recorded the highest annual increase among loan categories, reflecting a growing demand for specialized services in fields like consulting, engineering, and information technology.
Government Initiatives Boosting Economic Diversification
Government policies and initiatives aimed at diversifying the economy and promoting sectors like technology and innovation are driving increased demand for financing in specialized fields, with incentives for startups and research institutions playing a key role.