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Aggregate net income at Saudi’s 10 top listed banks grew by 4.3% in 2Q 2024, hitting SAR 19.5 bn, according to global consulting firm Alvarez & Marsal’s (A&M) Saudi Arabia Banking Pulse 2Q report (pdf).
Meet the banks: Saudi National Bank (SNB), Al Rajhi Bank, Riyad Bank, Saudi Awwal Bank (SAB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Bank Albilad, Saudi Investment Bank (SIB), and Bank Aljazira (BJAZ) were included in the second quarter line up. A&M’s quarterly Baking Pulse report gives the rundown on the financial performance of the top 10 listed banks in the Kingdom by assets, highlighting their income, profitability, size, liquidity, risk, and capital.
Operating income rose by 1.9%, driven by a 2.5% boost in net interest income (NII) and a 1.4% increase in fees and commissions. Cost efficiency improved, as operating expenses grew by 1% — slower than the increase in operating income. Meanwhile, a 27% drop in impairment charges also contributed to the uptick in net income.
Despite the rise in NII, net interest margins (NIM) fell by 2 basis points to 2.94%. Seven out of the 10 banks surveyed reported a drop in NIM. The spread between yield on credit and cost of funds remained static q-o-q at 5.0% as both measures increased 1.0%. Despite the slight NIM contraction, other profitability measures showed stability or growth, with return on equity growing 0.7 percentage points to 16.8%, and return on assets staying steady at 2.0%.
Loans and advances were up 3.2% q-o-q, surpassing deposit growth (2.3% q-o-q). The uptick in loan book growth drove a 0.8% q-o-q increase in the loan-to-deposit ratio to 97.8%. Corporate lending was the primary driver for the bump in L&A, growing 7.2% q-o-q. The category now accounts for 56% of total loans and advances.
Meanwhile, there was moderate increase in retail credit (+1.5% q-o-q), which now contributes 43% to total loans and advances. The report expects corporate loans to accelerate further in the upcoming interest rate cycle reversal, as businesses snap up cheaper loans to finance megaprojects.
Cost of risk also improved: Aggregate cost of risk improved by 11 basis points q-o-q to 0.28% in the second quarter on the back of a 27% improvement in impairment charges at SAR 1.8 bn. Half of the banks considered saw their cost of risk improve, with Riyad Bank leading the pack with a 38 basis points q-o-q decrease to 0.2%. Meanwhile Alinma and Albilad saw their cost of risk bump up 11 basis points at 0.69% and 0.31%.
