Saudi banks report 24% profit growth amid strong non-interest income 

Saudi banks report 24% profit growth amid strong non-interest income 
The increase in banks’ profits is primarily attributed to a combination of favorable factors that highlight the sector’s strength and ability to adapt. Shutterstock
Short Url
Updated 23 December 2024
Follow

Saudi banks report 24% profit growth amid strong non-interest income 

Saudi banks report 24% profit growth amid strong non-interest income 
  • Increase in banks’ profits is primarily attributed to a combination of favorable factors that highlight the sector’s strength and ability to adapt
  • Third quarter of 2024 marked a significant turning point, with non-interest income playing a pivotal role

RIYADH: Saudi banks’ aggregate profit reached SR7.7 billion ($2.05 billion) in October, marking a 23.67 percent year-on-year increase, newly released data has revealed. 

According to the Saudi Central Bank, also known as SAMA, these figures represent profits before zakat and taxes. 

Cumulatively, from the beginning of the year to the end of October, banks recorded a total profit of SR73.28 billion, compared to SR64.47 billion during the same period last year. 

The increase in banks’ profits is primarily attributed to a combination of favorable factors that highlight the sector’s strength and ability to adapt.  

The third quarter of 2024 marked a significant turning point, with non-interest income playing a pivotal role.

According to a Fitch Ratings report published in November, strong gains on securities and trading contributed SR1.4 billion to non-interest income, offsetting higher financing impairment charges and helping push combined quarterly profits to SR20 billion.  

This growth followed SAMA’s decision to implement a 50-basis-point interest rate cut in September, which mirrored the US Federal Reserve’s shift toward a more accommodative monetary policy. 

The rising interest rate environment that characterized much of the Gulf region in recent years had previously bolstered bank returns on loans, as higher borrowing costs translated into greater income from financing activities. 

However, this dynamic also increased funding costs, particularly for savings accounts and external liabilities.   

Many Saudi banks navigated these challenges by diversifying their funding sources, tapping into external markets, and issuing a record $13 billion in debt in the first eight months of 2024 to meet growing foreign-currency financing demands, particularly for giga-projects.  

Despite these efforts, deposit growth in the third quarter of 2024 lagged behind earlier quarters, according to Fitch, reflecting the sector’s strategic pivot toward external funding to sustain its expansion.  

The recent shift in monetary policy by the US Federal Reserve, which influences rates in Saudi Arabia due to the riyal’s peg to the dollar, has injected new dynamics into the financial landscape. 

After a period of aggressive rate hikes to combat inflation, the Fed lowered interest rates by 50 basis points in September, followed by successive 25-basis-point cuts in November and December, signaling a focus on boosting economic growth as inflation eased to acceptable levels. 

This policy change benefited Saudi banks by improving the valuation of certain securities, as noted by Fitch, and created a more favorable environment for non-interest income growth. 

Another critical factor underpinning Saudi banks’ profitability has been their robust asset quality and prudent risk management.  

The average impaired financing ratio, according to Fitch Ratings, remained low at 1.5 percent by the end of the third quarter, with provision coverage at a healthy 116 percent.  

This stability reflects the resilience of Saudi banks in managing risks associated with their expanding financing books, which grew by 3.6 percent during the quarter, led by strong performances from banks like Aljazira, Saudi Awwal Bank, and Saudi Investment Bank. 

The sector’s healthy operating environment is supported by the Kingdom’s broader economic stability and strategic investments under Vision 2030, which continue to drive demand for corporate financing. 

While external liabilities and a negative net foreign asset position present challenges, Saudi banks remain well-capitalized, with average Common Equity Tier 1 ratios of 15.6 percent, and are positioned to maintain strong asset quality metrics as they navigate a shifting global monetary landscape. 

The combination of rising non-interest income, strategic funding diversification, and favorable monetary policy shifts underscores the resilience of Saudi Arabia’s banking sector, making it a key player in the region’s economic transformation. 

As SAMA continues to align with global trends, Saudi banks are poised to further strengthen their profitability while maintaining a balanced approach to growth and risk management. 


Habib Bank, S&P Global launch Pakistan’s first index to track manufacturing sector

Habib Bank, S&P Global launch Pakistan’s first index to track manufacturing sector
Updated 41 min 31 sec ago
Follow

Habib Bank, S&P Global launch Pakistan’s first index to track manufacturing sector

Habib Bank, S&P Global launch Pakistan’s first index to track manufacturing sector
  • The index will be a standardized economic indicator based on a survey of a diverse panel of industries
  • It will help track economic developments in Pakistan, support decision making by financial institutions

ISLAMABAD: Pakistan’s largest bank, Habib Bank Limited (HBL), and global financial information and analytics firm S&P Global have launched a new index to track the country’s manufacturing sector, the companies said on Friday.
Rising taxes and power tariffs have led to social unrest and hammered industries in Pakistan’s $350 billion economy, as it navigates a tricky path to recovery under a $7 billion International Monetary Fund (IMF) program approved in September.
The HBL S&P Global Purchasing Managers’ Index will be a standardized economic indicator based on a survey of a diverse panel of industries.
It will be Pakistan’s first comprehensive manufacturing index and a welcome source of information for investors in a country where economic data is scarce.
The industries will be asked about their perceptions of current business conditions and future expectations and the index will be released on the first working day of each month, the companies said in a statement.
“The launch of Pakistan’s first ever PMI is a significant event contributing to the accessibility of timely and high-frequency data to track economic developments in Pakistan and support decision making by financial institutions, investors and businesses,” said Luke Thompson, Managing Director of S&P Global Market Intelligence, in a statement.
Muhammad Nassir Salim, President & CEO of HBL said the series will enhance investor confidence and transparency in Pakistan’s economy.


Saudi banks see record profits amid strong credit growth and debt market expansion

Saudi banks see record profits amid strong credit growth and debt market expansion
Updated 14 February 2025
Follow

Saudi banks see record profits amid strong credit growth and debt market expansion

Saudi banks see record profits amid strong credit growth and debt market expansion

RIYADH: Saudi Arabia’s top 10 listed banks recorded all-time high net profits in 2024 of SR79.64 billion ($21.23 billion), reflecting a 13.84 percent annual increase, according to data from the Saudi Exchange.

The robust performance was driven by strong lending growth, declining interest rates, and increased participation in debt markets.

Saudi National Bank, known as SNB AlAhli, led the sector, accounting for 26.6 percent of total banking profits at SR21.19 billion, followed closely by Al Rajhi Bank, which contributed 24.8 percent, reaching SR19.72 billion.

These two banks constituted about 51.4 percent of the sector’s total profits.

Among the banks with the highest annual growth, Arab National Bank topped the list with a 21.98 percent rise in net profits to SR4.97 billion. Bank AlJazira followed with a 20.69 percent increase, reaching SR1.23 billion, despite holding the smallest share of sector profits at 1.5 percent.

Total assets for the top 10 Saudi banks surged to SR4.21 trillion in 2024, marking a 13.6 percent increase year on year. SNB AlAhli held the largest asset base at SR1.1 trillion, followed by Al Rajhi Bank at SR974.39 billion, with both banks collectively accounting for 49 percent of the sector’s total assets.

Al Rajhi Bank recorded the fastest asset growth, expanding by 20.58 percent, followed by Saudi Investment Bank, which grew by 20.53 percent to reach SR156.67 billion.

Saudi Arabia’s banking sector is poised to sustain its profitability in 2025, bolstered by strong credit growth and corporate lending tied to Vision 2030 projects, according to an S&P Global report released in January.

The financial services agency projected that bank lending would expand by 10 percent, driven primarily by corporate loans as the Kingdom continues to invest heavily in large-scale economic initiatives.

The outlook remains positive as stable credit growth, supported by easing interest rates and a favorable economic environment, is expected to maintain banks’ profitability, with return on assets estimated to remain between 2.1 percent and 2.2 percent.

The report further highlighted that banks may increasingly turn to international capital markets to finance Vision 2030-related investments, ensuring a steady flow of liquidity. Meanwhile, mortgage lending is also anticipated to rise, supported by lower borrowing costs and demographic trends fueling demand for residential properties.

Saudi banks have also maintained a dominant presence in the stock market, leading Tadawul’s trading activity in 2024’s fourth quarter with a 17 percent market share, surpassing the materials and energy sectors.

Bank loans and main growth drivers

Saudi banks’ total loans and advances to customers grew by 14.41 percent year on year in 2024, reaching SR2.81 trillion, while deposits rose by 7.87 percent to SR2.68 trillion during the same period.

Al Rajhi Bank led in loan issuance, providing SR693.4 billion, a 16.8 percent increase from the previous year, followed by SNB AlAhli with SR654.25 billion and Riyadh Bank with SR274.4 billion.

With the Saudi riyal pegged to the US dollar, the Kingdom’s central bank, known as SAMA, mirrors Fed rate movements. After interest rates peaked at 6 percent in 2024, they began to decline in September, reducing borrowing costs.

According to SAMA, 11.28 percent of total bank loans — 21 percent of corporate loans— were allocated to real estate, a key enabler of the Kingdom’s infrastructure expansion.

Saudi Investment Bank posted the highest loan growth rate at 23.18 percent, reaching SR99.47 billion, followed by Saudi First Bank with a 20.10 percent increase to SR259.35 billion.

Deposits and funding strategies

Bank deposits for the top 10 Saudi banks reached SR2.68 trillion in 2024, with Al Rajhi Bank holding the highest share at SR628.24 billion, followed by SNB AlAhli at SR579.76 billion.

The strongest deposit growth was seen in Riyadh Bank, which expanded by 20.21 percent to SR306.42 billion, followed by Bank AlJazira with a 15 percent increase to SR108.19 billion.

As lending growth outpaces deposit expansion, Saudi banks have increasingly turned to the debt capital market to fund their credit expansion.

According to Fitch Ratings, Saudi banks have significantly increased their international debt issuance since 2020, aligning with their long-term growth strategies and foreign-currency funding needs.

The GCC banking sector is projected to issue more than $30 billion in US dollar-denominated debt in 2025, following a record $42 billion in 2024, according to Fitch.

This surge is primarily driven by nearly $23 billion in maturing debt, lower US interest rates, and sustained regional credit demand, particularly in Saudi Arabia and the UAE.

In 2024, GCC banks represented 18 percent of all emerging-market bank debt issuance in US dollars — a figure that rises to 36 percent when excluding Chinese banks. Strong global investor confidence, supported by stable oil prices projected around $70 per barrel in 2025, has further strengthened regional debt markets.

Short-term certificates of deposit emerged as a key instrument in GCC bank funding strategies, accounting for 21 percent of total debt issuance in 2024. 


Saudi Arabia leads GCC in US dollar debt and sukuk issuance, driving regional growth: Fitch

Saudi Arabia leads GCC in US dollar debt and sukuk issuance, driving regional growth: Fitch
Updated 14 February 2025
Follow

Saudi Arabia leads GCC in US dollar debt and sukuk issuance, driving regional growth: Fitch

Saudi Arabia leads GCC in US dollar debt and sukuk issuance, driving regional growth: Fitch

RIYADH: Saudi Arabia holds the largest share of the Gulf Cooperation Council’s debt capital market, with 44.8 percent of outstanding issuances, according to Fitch Ratings.

The US-based agency claims the GCC’s total DCM surpassed the milestone of $1 trillion at the end of January, reflecting a 10 percent year-on-year growth across all currencies. 

Saudi Arabia, alongside the UAE, boasts the most mature financial landscape, with both countries leading in sukuk and bond issuances. 

Fitch expects the Kingdom to play a pivotal role in driving US dollar debt and sukuk issuance in 2025 and 2026, as Saudi Arabia’s financial institutions and corporations increasingly turn to international debt markets to diversify funding sources, with banks alone anticipated to issue over $30 billion in US dollar-denominated debt this year. 

In a different report issued earlier this month, Fitch expected Saudi Arabia’s debt capital market to hit $500 billion by the end of 2025, fueled by economic diversification efforts under Vision 2030.

The DCM, which involves the trading of securities like bonds and promissory notes, serves as a key mechanism for raising long-term capital for both businesses and governments.

In its latest report, Fitch Ratings said: “Falling oil prices could lead to further DCM growth as lower government revenues could lead to increased borrowing.” 

It added that the anticipated reduction in US Federal Reserve interest rates in 2025 is expected to create a more favorable funding environment, with GCC central banks likely to follow suit. 

Saudi Arabia and the UAE, in particular, are set to benefit from this trend, further solidifying their positions as key regional and global financial hubs. 

GCC’s growing role in global debt markets 

The GCC accounted for a quarter of all emerging-market US dollar debt issued in 2024, excluding China, with Saudi Arabia, Turkiye and the UAE leading the way.. 

GCC US dollar DCM issuance surged by 65.8 percent year on year in 2024 to $133.4 billion, underscoring the region’s increasing reliance on international debt markets. New GCC fund passporting regulations could enhance DCM investment opportunities. 

Sukuk remained a key financing tool, making up 40 percent of the GCC’s total DCM as of January. Saudi Arabia and its regional counterparts contributed over 40 percent of global sukuk issuance, with GCC volumes soaring 43 percent year on year in 2024 to $87.5 billion. 

Notably, nearly 80 percent of Fitch-rated GCC sukuk are investment-grade, with the majority falling within the “A” category, while the remainder is mostly split between AA, BBB, BB, and B ratings. 

Most issuers are on “Stable Outlook”’ with the rest mainly on “positive.” Islamic banks played a crucial role in the sukuk ecosystem, both as issuers and investors, reinforcing the Kingdom’s leadership in Islamic finance. 

Challenges such as Shariah compliance complexities could impact sukuk structuring and issuance, Fitch warned. 

Saudi Arabia and UAE dominate ESG debt market 

The GCC’s environmental, social, and governance debt market surpassed $50 billion in outstanding issuances by the end of January, according to the ratings agency. 

Saudi Arabia and the UAE led this segment, with ESG debt representing 7.3 percent of the Kingdom’s total dollar debt issuance in 2024. 

ESG-debt issuance was also a sizable part — 17 percent — of dollar debt issuance in the UAE. 

“ESG debt could help issuers tap demand from ESG-sensitive international investors from the US, Europe and Asia,” Fitch said. 

Challenges and future prospects 

Despite its rapid expansion, the GCC’s DCM faces hurdles, including a bank-dominated investor base, a preference for bank financing over capital market funding, and limited local-currency debt issuance outside of Saudi Arabia. 

The Kingdom’s riyal-denominated market is the most developed in the region but “still has more room for growth,” according to Fitch. 

Kuwait became the GCC’s third-largest dollar debt issuer in 2024, with a total of $13.6 billion, led by banks. This is despite the absence of the public debt law, which would enable sovereign borrowing. 

Historically, US dollar issuances from Kuwait have been sporadic and rare, with only $11.8 billion issued between 2018 and 2023. “Kuwait’s new government plans to revise liquidity laws to facilitate capital market borrowing, but the timeline is uncertain,” Fitch said.
 


Oil Updates — crude to snap 3-week losing streak amid US tariff delays

Oil Updates — crude to snap 3-week losing streak amid US tariff delays
Updated 14 February 2025
Follow

Oil Updates — crude to snap 3-week losing streak amid US tariff delays

Oil Updates — crude to snap 3-week losing streak amid US tariff delays

SINGAPORE: Oil prices rose in Asian trade on Friday, poised to end three weeks of decline, buoyed by rising fuel demand and expectations that US plans for global reciprocal tariffs would not come into effect until April, giving more time to avoid a trade war.

Brent futures were up 59 cents, or 0.8 percent, at $75.61 a barrel by 3:22 p.m. Saudi time. US West Texas Intermediate crude gained 47 cents, or 0.7 percent, to $71.76. Both contracts were on track for weekly gains of about 1 percent.

US President Donald Trump on Thursday ordered commerce and economics officials to study reciprocal tariffs against countries that place tariffs on US goods and to return their recommendations by April 1.

“Positive development on the trade front in light of US tariff delays paves the way for some recovery in oil prices this morning, as the risk environment warms up to the prospects of further trade consensus being reached,” said Yeap Jun Rong, a market strategist at IG.

“However, gains in oil prices may seem limited as market participants have to digest the prospects of Russian supplies being brought back on the market amid potential Ukraine-Russia peace talks,” Yeap said.

A potential peace deal between Russia and Ukraine kept traders concerned that an end of sanctions on Moscow could boost global energy supplies.

Trump ordered US officials this week to begin talks on ending the war in Ukraine, after Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky expressed a desire for peace in separate phone calls with him.

Russian oil exports could be sustained if workarounds to the latest US sanctions package are found, after Russian crude production rose slightly last month, the International Energy Agency (IEA) said in its latest oil market report.

Meanwhile, global oil demand has surged to 103.4 million barrels per day, a 1.4 million bpd increase year-over-year, analysts at JPMorgan said in a report on Friday.

“Initially sluggish, demand for mobility and heating fuels picked up in the second week of February, suggesting the gap between actual and projected demand will soon narrow,” JPMorgan said, adding: “Heating fuel use is expected to rise again. Additionally, soaring gas prices in Europe could prompt a shift from gas to oil, boosting demand.” 


Saudi Arabia, IMF lead talks on economic resilience at AlUla summit

Saudi Arabia, IMF lead talks on economic resilience at AlUla summit
Updated 13 February 2025
Follow

Saudi Arabia, IMF lead talks on economic resilience at AlUla summit

Saudi Arabia, IMF lead talks on economic resilience at AlUla summit

JEDDAH: Policymakers, economists, and industry leaders will gather in Saudi Arabia next week for the AlUla Conference for Emerging Market Economies, where discussions will focus on global economic shifts, challenges, and the growing influence of artificial intelligence in driving growth. 

The event, set for Feb. 16-17, is a joint initiative between Saudi Arabia’s Ministry of Finance and the International Monetary Fund. The annual conference aims to serve as a key platform for addressing structural changes in the global economy and their impact on emerging markets, according to the Saudi Press Agency.  

Saudi Finance Minister Mohammed Al-Jadaan said the forum would provide an opportunity for decision-makers to exchange insights on economic policies designed to navigate current challenges. 

“The conference will also showcase the latest regional and global economic developments, focusing on enhancing prosperity and resilience,” Al-Jadaan said. 

IMF Managing Director Kristalina Georgieva highlighted the significance of the event, noting that it comes at a time of rapid transformation. 

 “It will provide a vital platform for policymakers, the private sector, and key stakeholders to discuss how emerging economies can take advantage of the opportunities offered by current economic shifts, strengthen their competitiveness, and achieve strong growth driven by the private sector,” Georgieva said. 

A January report from Moody’s projected that oil production and large-scale investment projects would accelerate annual economic growth in the Middle East and North Africa by 0.8 percentage points in 2025. 

Saudi Arabia, which is leading economic diversification efforts under Vision 2030, has increasingly positioned itself as a hub for global economic dialogue. The AlUla conference underscores the Kingdom’s efforts to foster international cooperation amid shifting economic dynamics.