Saudi Arabia’s Top Banks See 17% Surge in Earnings in Q2 of 2024
In a financial boom for Saudi Arabia, the top 10 listed banks experienced a whopping 17 percent increase in earnings in the second quarter of 2024, reaching a total of SR19.54 billion ($5.21 billion).
Top Performers in the Banking Sector
According to data from Bloomberg, Saudi National Bank led the pack with the highest net income of SR5.23 billion, showcasing a remarkable 27 percent growth compared to the same period last year. Al Rajhi Bank followed closely with earnings of SR4.7 billion, marking a 20 percent rise in profits.
Calculating Adjusted Net Income
These figures represent adjusted net income, which factors out non-recurring, non-operational, or extraordinary items that could potentially skew a company’s true performance.
Driving Factors Behind the Growth
The increase in bank loans in Saudi Arabia has outpaced deposit growth, which expanded by 9 percent during this period. This trend has allowed financial institutions to generate more profits than costs, ultimately fueling the surge in earnings.
Impact of US Interest Rates on Saudi Banking Sector
The rise in interest rates in the US, with the Saudi riyal pegged to the dollar, has led the Saudi Central Bank (SAMA) to align its monetary policy with the Federal Reserve. This move has increased the cost of credit in the Kingdom, affecting borrowing and lending activities.
Future Projections and Focus Areas
Fitch projects that Saudi banks will grow at double the Gulf Cooperation Council average, with financing growth estimated at around 12 percent for 2024. The sector is expected to prioritize corporate credit, which is anticipated to make up about 60 percent of new loan originations.
Positive Outlook for Saudi Banking Sector
The operating environment for Saudi banks remains favorable, with a “bbb+” score, the highest among GCC banking sectors and emerging markets globally. This optimistic outlook is supported by high oil prices, substantial government spending on giga-projects, and the Vision 2030 strategy, leading to robust non-oil GDP growth.