The financial pulse of Saudi Arabia’s banking sector is beating stronger than ever, as reported in a recent analysis by Alvarez & Marsal, revealing a significant increase in net profits. The third quarter of 2023 saw the sector’s aggregate net income swell by 3.74 percent, reaching SR18.03 billion, up from SR17.38 billion in the preceding quarter.
Core Income Growth Amidst Slight Non-core Decline
The surge in profits can be largely attributed to a healthy 3.8 percent growth in net interest income, which bolstered the banks’ operating income despite a slight decrease in non-core income. Further contributing to the upward trend, banks experienced a marked reduction in impairment charges, down by 17.9 percent from the previous quarter, indicating a positive shift in net profit growth.
Loan-to-Deposit Ratio Hits Four-Year High
A key financial indicator, the loan-to-deposit ratio, climbed 2.3 percent from the previous quarter, signaling the strongest performance in this metric over the last four years. This was supported by a vigorous increase in loans and advances, which grew at a faster pace than deposits, demonstrating a confident lending environment.
Solid Returns and Sustainable Growth
Saudi banks also reported a rise in return on equity by 70 basis points, achieving a solid 16.4 percent, while maintaining a steady return on assets at 2 percent. The sector’s lending and deposit mobilization maintained a moderate growth trajectory, with corporate and wholesale lending driving the increase in loans and advances. Despite a slight uptick in operating expenses, the improved cost of risk highlighted the sector’s enhanced asset quality.
This comprehensive report reflects the financial health and forward momentum of Saudi Arabia’s top ten listed banks, painting a picture of a resilient and expanding banking industry.
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