Saudi banks issuances to remain strong in 2026 -Fitch

Saudi banks are leading a shift in GCC bank debt markets toward subordinated USD instruments, according to a note from Fitch Ratings. Issuance is set to stay strong into 2026, driven by rising capital needs and the implementation of tighter rules, the rating agency forecasts.

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By the numbers: Saudi banks have raised more than USD 29.3 bn in debt so far this year — over half of the GCC’s total issuance, including USD 11.7 bn in AT1 and Tier 2 capital. Subordinated debt made up over 70% of issuances — excluding certificates of deposit (CDs) — up from 50% in 2024. They have also issued over USD 13 bn in CDs, giving them access to a wider pool of investors at a time when local liquidity remains tight.

The drivers: Saudi banks are lending money faster than they are taking in deposits, which is shrinking their capital buffers. This has caused their Common Equity Tier 1 (CET1) ratios — a key measure of a bank’s financial strength which weighs shares and earnings against risk-weighted assets — to fall by 213 basis points from 2020-2024. This pressure is expected to continue, with lending projected to grow by 12% this year and remain strong into 2026. Furthermore, new regulations will require banks to hold a 1% countercyclical buffer starting in May 2026, and Vision 2030 projects will continue to demand significant financing.

Banks are balancing AT1 and Tier 2 in response: Saudi banks have issued nearly USD 6 bn in Tier 2 instruments this year to rebalance capital structures and draw more international investors, while AT1 remains dominant due to favorable pricing and regulatory flexibility, the note said.

Fitch expects issuance to stay elevated in 2026, driven by over USD 10 bn in maturities, USD 1.8 bn of AT1 instruments reaching first call dates, strong financing demand, and lower interest rates.

REMEMBER- Saudi banks’ net income grew 18% y-o-y in 2Q 2025, beating consensus forecasts by 3%. Aggregate lending growth was also robust at 16% y-o-y, outpacing deposit growth and lifting the system-wide loan-to-deposit ratio to 106%.