Saudi Bank Profits Hit $21.3bn In 2024 Amid Fast Growth And Low Risk

Lending growth remained strong, and Fitch said it expects it to continue outpacing Gulf peers’ in 2025.

Fitch estimates that the sector average NIM (calculated as net interest income/average earning assets) for Saudi banks rose to 3.2 per cent in Q4 (9M24: 3.1 per cent), as banks’ cost of funding reduced by 12bp (to 3.2 per cent) after the central bank cut interest rates by 50bp in 4Q24.

Saudi bank earnings

The average earning assets yield remained stable at 6.3 per cent.

Banks with higher levels of retail financing benefitted most, reflected by the NIMs of Al Rajhi Bank and Bank Aljazira improving by 20bp quarter on quarter (to 3.4 per cent and 2.3 per cent, respectively), while Saudi National Bank’s (SNB) NIM was 3 per cent in 4Q24, up from 2.7 per cent in 3Q24.

Saudi banks’ combined net profit was SR80bn ($21.3bn) in 2024, up from SR70bn ($18.7bn) in 2023, with the sector average return on equity improving to 15 per cent (2023: 14 per cent).

The rise in earnings was driven by fast growth and a lower cost of risk (2024: 30bp; 2023: 40bp), both underpinned by the healthy operating environment.

Lending expanded by SR87bn ($23.2bn/3.1 per cent) in Q4.

Al Rajhi Bank had the strongest growth of SR44bn ($11.7bn/6.7 per cent), with equal contributions from its retail and corporate segments.

Annual growth of gross financing at Saudi banks averaged 14 per cent in 2024 (up from 11 per cent in 2023), with three banks reporting considerably higher levels:

• Saudi Awwal Bank (20 per cent)
• The Saudi Investment Bank (22 per cent)
• Bank Aljazira (19 per cent).

Fitch Ratings expects Saudi banks to continue growing faster than their peers from other Gulf countries in 2025, forecasting sector financing to increase by 12 per cent.

Further interest rate cuts and stronger liquidity conditions should underpin banks’ growth appetite.

The customer deposits balance of Saudi banks reduced by SR35bn ($9.3bn) in Q4, marking the first quarter since 2019 when deposits declined.

However, this has a seasonal component, and Fitch Ratings said it expects a stronger performance in Q1 of 2025, as occurred in Q1 of 2023 and Q1 of 2024. Deposits grew by SR40bn ($10.7bn) in January 2025, according to the Saudi Central Bank.

SNB had the largest outflow of customer deposits in Q4, with its balance dropping by SR54bn ($14.4bn).

This included a SR30bn ($8bn) decrease in current and savings deposits, although these remain a still-high 72 per cent of total deposits.

SNB mitigated the outflow with repo facilities (SR12bn/$3.2bn) increase) and money market deposits (SR11bn/$2.9bn increase), and its Fitch-calculated loans/deposits ratio grew to 115 per cent at end-2024 (sector average: 105 per cent). SNB’s regulatory loans/deposits ratio remained comfortable at 84 per cent.

Saudi banks’ external liabilities remained stable at around SR400bn ($106bn) at end-4Q24 (about 11 per cent of total sector funding).

Net foreign assets fluctuated around 0.5 per cent of total sector assets. We expect Saudi banks to gradually increase their reliance on external funding, especially if corporate borrowers continue to demand foreign-currency financing, but net foreign assets will remain below 2 per cent in 2025.