Saudi banks projected to outpace GCC peers in 2025: Growth in Saudi banks' lending activity is expected to average 12% y-o-y in 2025 on the back of further interest rate cuts and stronger liquidity, according to estimates from Fitch Ratings. The increase is expected to outmatch that of other GCC banks. The story also got ink from Al Arabiya.

The average increase in gross financing at local banks rose to 14% last year, up from 11% in 2023, led by the Saudi Investment Bank (22%), Saudi Awwal Bank (20%), and Bank Aljazira (19%), according to Fitch.

ICYMI- Bank credit grew 14.4% y-o-y to SAR 3.0 tn in 4Q 2024, according to Sama figures, with personal loans accounting for the lion’s share.

Local banks saw their net income grow 7.5% q-o-q to SAR 21.5 bn in 4Q 2024 on the back of interest rate cuts boosting net interest margins (NIM), the rating agency said. Meanwhile, their aggregate net income grew 14.3% y-o-y to SAR 80 bn in 2024, supported by fast growth and lower cost of risk, with return on equity reaching up to 15%.

The drivers: Average NIM increased to 3.2% in 4Q as borrowing costs dropped by 12 basis points (bps) following the Saudi Central Bank’s (SAMA) 50 bps rate cut in 4Q. Banks with higher levels of retail financing performed better, with Saudi National Bank (SNB) seeing its NIM rise to 3% in 4Q 2024, up from 2.7% in 3Q 2024. Meanwhile, Al Rajhi Bank and Bank Aljazira reported a 20 bps q-o-q jump in NIM to 3.4% and 2.3%, respectively.

ALSO- External liabilities were stabilized at SAR 400 bn in 4Q 2024. Net foreign assets hovered around 0.5% of total assets during the same period, with Fitch expecting them to gradually rise in 2025 on the back of increasing reliance on external funding, while remaining below 2%.

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