Saudi Banks See 8% Surge in Earnings in Q1 of 2024
In a remarkable financial feat, Saudi Arabia’s top 10 listed banks witnessed a whopping 8 percent increase in earnings during the first quarter of 2024, soaring to SR18.65 billion ($5 billion) compared to the same period last year. This surge can be attributed to various factors, including an 11 percent growth in lending and a rising interest rate environment that has elevated the cost of credit.
Growth in Lending Outpaces Deposits
The latest data from the Saudi Central Bank revealed that loans reached SR2.67 trillion by the end of March, surpassing deposits which increased by 8 percent. Despite higher interest rates, outstanding credit facilities in the Gulf Cooperation Council region continued to expand in Q1 of 2024, showcasing the resilience of the financial sector.
Strong Lending Growth Reflects Economic Expansion
The robust expansion in lending across the GCC countries signifies a broader trend of economic growth and investment in the region, highlighting the strength and stability of the financial systems. With each country experiencing significant increases in lending growth compared to last year, the financial sector is set on a path of prosperity.
Positive Outlook for Saudi Banks
S&P Global forecasts robust credit growth for Saudi banks in 2024, ranging between 8 to 9 percent, driven by corporate lending and economic activities stemming from the Vision 2030 program. Moody’s Investors Service also reaffirmed a positive outlook for Saudi Arabia’s banking sector, citing economic diversification programs and growth in loans for low-risk government-backed projects as key factors.
Anticipation of Continued Credit Expansion
With anticipation of the Saudi government injecting deposits into the banking system, financial institutions in the Kingdom are poised for further credit expansion. Saudi National Bank led the earnings chart in Q1, followed by Al Rajhi Bank, with Saudi Arabia dominating Forbes 2024 MENA’s 30 most valuable banks list.
Alinma Bank’s Remarkable Growth
Despite representing only 7 percent of total revenues in Q1, Alinma Bank experienced a remarkable 36 percent surge compared to the previous year, reaching SR1.31 billion. This growth was attributed to various income streams including net income from financing and investment, banking service fees, and income from evaluating investments at fair value.
Alternative Funding Strategies on the Horizon
As Saudi banks manage the swift expansion in lending, alternative funding strategies are expected to be adopted, driven by the increasing demand for new mortgages. While the government injects deposits into the banking system, Saudi banks are projected to continue accessing international capital markets in the coming years.