The Kingdom’s top ten banks saw robust earnings last year on the back of a 3.1% increase in net interest margin, according to global consulting firm Alvarez & Marsal’s (A&M) Saudi Arabia Banking Pulse report (pdf). The increase was supported by strong demand for credit coupled with operational gains, better lending margins. and high interest rates, it said.

How it works: A&M’s Banking Pulse analyzes data from the top ten locally listed banks, and compares their financial performance on a yearly basis. It looks at their size, liquidity, income, operating efficiency, risk, and capital. The banks include Saudi National Bank (SNB), Al Rajhi Bank, Riyad Bank among others.

Diving in: Aggregate net income by the leading banks rose 11.8% y-o-y to SAR 70.1 bn on the back of a higher operating income and lower impairments. Operating income grew 9.5% last year, albeit slower than the 15.4% growth a year earlier, the report showed. Impairments were slightly down 1.1% y-o-y.

Deposits made by government-related entities hit a record high in 2023, accounting for 31.2% y-o-y of total bank deposits in 2023 from 28.4% a year earlier. This helped boost money supply and helped local banks navigate the liquidity crunch.

Looking ahead: “Moving forward, we expect a positive outlook for KSA banks with prospective loan growth, improving asset quality and well capitalized books. Given the upcoming scenario of interest rate cuts by the second half of 2024, we anticipate that NIMs will remain stable at around 3% during the year,” Asad Ahmed, Managing Director and Head of Middle East Financial Services at A&M said.

Tags: