Saudi banks posted an 18% growth in their net profits y-o-y in 2Q 2025, surpassing consensus forecasts by 3%, according to a Kamco Invest report (pdf). Retail banks, including Al Rajhi, SNB, and Al Bilad, saw their bottomlines coming in about 4% higher than forecasts, while corporate banks exceeded expectations by about 3%.

Aggregate lending growth remained robust at 16% y-o-y during the quarter, exceeding deposit growth and lifting up the system-wide loan-to-deposit ratio (LDR) to 106%. The growth was mainly backed by Riyad Bank, SAB, Alinma, and Al Rajhi, according to the report.

Net interest margins (NIMs) extended their contraction during 2Q, hammered by tighter liquidity and rising competition in the corporate segment. Meanwhile, non-interest income jumped 26% y-o-y, boosted by higher fees, commissions, trading income, and foreign exchange gains.

Sector breakdown: Corporate real estate loans saw a modest growth of 0.3% q-o-q to hit SAR 221 bn in 2Q 2025, while retail loans grew by 2% q-o-q during the quarter, recording SAR 712 bn. However, the retail mortgage market remained “under pressure,” with new residential originations dipping 32% q-o-q in 2Q to SAR 19 bn, according to the report.

LOOKING AHEAD- Kamco Invest predicts a pickup in mortgage demand by 4Q 2025, driven by September’s rate cut, government housing initiatives, and seasonal bank promotions. “The recent amendment to the White Land Tax Law, which imposes a 5-10% tax on vacant plots to encourage development, is also expected to increase housing supply and support mortgage growth,” according to the report.

The segment will also be supported by the new real estate foreign ownership law, that will allow expatriates to buy homes in the Kingdom in designated zones starting January. The report also highlighted a shift in management focus towards cost optimization, looking to safeguard and gradually enhance NIMs.

Asset quality remained strong despite softer oil prices, with the majority of lenders reporting robust rebounds. Net non-performing loans (NPLs) stands unchanged from the first quarter, at 1.9%.

Time & savings deposits have also seen significant growth of 15.7% YTD, while demand deposits have reported only 3.7% growth, fueling competition for current and savings accounts and leading some banks, including SNB, to provide cost-bearing products, Kamco said.

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