Saudi banks pick margins over market share in 2Q

The biggest banks are trading loan volume for higher margins: Al Rajhi, Saudi National Bank, and Riyad Bank — Saudi Arabia’s biggest three banks — have all cut their 2026 loan targets as their “focus shifts to value over volume,” Al Rajhi Capital said in a report cited by Arab News. Net interest margins across Saudi Arabia’s 10 listed banks grew 5 bps to 2.9% in 2Q 2026, pushing net funded income up 9% to SAR 32.6 bn (USD 8.7 bn) — enough for the three banks to post strong earnings even as their loan books nearly stalled.

Al Rajhi, SNB and Riyad Bank all trimmed their 2026 loan growth guidance. Al Rajhi’s guidance slid to low-single-digit growth from low-to-mid, while SNB’s is now mid-single-digits from high-single-digits and Riyad Bank cut its forecast to mid-to-high single digits from high. Only Bank AlJazira went the other way, lifting its forecast to low-teens.

Mid-tier lenders are grabbing share: AlJazira’s book rose 17% to SAR 121 bn, Albilad’s grew 15% to SAR 133.4 bn, and Saudi Awwal Bank’s increased 13% to SAR 320.2 bn. Meanwhile, Al Rajhi (SAR 762.1 bn) and SNB (SAR 739.6 bn) each grew a flat 3%.

Deposits are catching up to loans: Sector deposits grew 9% y-o-y to SAR 3.2 tn, outpacing loan growth of 7% (to SAR 3.3 tn). The loan-to-deposit ratio still sits at a stretched 103% but deposit growth is starting to reopen headroom. Al Rajhi’s 14% net income jump rode on financing income, not new lending, and SNB’s 7.6% bottom line increase leaned on fees and investment gains.

What to watch: If the Saudi central bank cuts interest rates, that would squeeze the margin story that’s currently carrying the sector. Corporate lending (+10%) is still outrunning retail (+4%), so any rebound will likely tilt corporate.