Saudi Arabia’s Banking Sector Soars to New Heights in 2023
The financial landscape in Saudi Arabia witnessed a remarkable surge in 2023, with total banking assets soaring by 9.5 percent compared to the previous year, inching closer to the monumental $1 trillion mark by the end of the year.
The 10 banks listed on the Saudi Stock Exchange, Tadawul, showcased a robust performance, recording an impressive 11.72 percent increase in net profit compared to 2022.
Data released by the Kingdom’s central bank, SAMA, and analyzed by KPMG revealed that total profits amounted to SR70.07 billion ($18.68 billion) last year, a significant rise from SR62.72 billion in 2022.
Total assets also witnessed a substantial growth, reaching SR3.7 trillion in 2023 from SR3.38 trillion in 2022.
This noteworthy progress in the banking sector can be attributed to the industry capitalizing on the advantages of economic expansion and a higher interest rate environment, as stated in a report by KPMG, which also predicts this positive momentum to persist into 2024.
The surge in net profit was supported by a 10.89 percent increase in net special commission income and a 4.39 percent decrease in the expected credit loss charge compared to the previous year.
According to Ovais Shahab, Head of Financial Services at KPMG in Saudi Arabia, the drop in ECL allowances was due to improved portfolio performance and the absence of systematic default incidents, aided by the economic expansion facilitating distressed borrowers to settle their debts.
In addition, timely repricing of assets and liabilities led to a boost in net margin, while the industry’s fee income also saw a growth of 2.43 percent.
With the industry’s loan-to-deposit ratio standing at 99.2 percent, KPMG emphasized the need for maintaining sufficient liquidity in the banking system to support growth and meet domestic demands.
Various measures have been implemented to ensure liquidity, including strategies for recapitalization of retained earnings and issuance of sukuk in both domestic and international markets to fortify financial positions.
Looking ahead, KPMG highlighted the interconnected uncertainties and emerging risks in the global banking industry, which could impact the region, with geopolitical threats and technological disruptions posing challenges for economies.
Shahab commended the Saudi Central Bank for its active role in managing risks and supporting the Kingdom’s economic expansion agenda through dialogue with market participants.