Supported by higher fee income and cost efficiency, the aggregate net income of Saudi Arabia’s top 10 listed banks grew by 6.3% q-o-q in the first quarter of this year to $5.92 billion, compared with 1.9% increase in Q4 2024, global consulting firm Alvarez & Marsal’s (A&M) said in its latest Saudi Arabia Banking Pulse Q1 report.
Lending momentum for the Saudi Arabia’s banks continued growing at 5.4% q-o-q in the first quarter of this year, compared with +3.3% q-o-q in the fourth quarter of last year, driven by corporate loans (+7.5% q-o-q as against +3.4% q-o-q in Q4 2024) and accounted for 57.4% of the total gross loans.
The aggregate customer deposits grew 4.0% q-o-q (-1.3% q-o-q in Q4 2024), driven by time deposits (+8.1% q-o-q vs -3.8% q-o-q in Q4 2024), accounting for 39% of total deposits. Consequently, Loans to Deposit Ratio (LDR) of the banks increased to 106.1%.
The report said that profitability of the banks improved as operating income growth gained pace to 3.2% q-o-q (+1.1% q-o-q in Q4 2024), driven by growth in noninterest income, which increased during the quarter by 9.6% q-o-q (-5.6% q-o-q in Q4 2024).
The Saudi banks kept costs under control with operating expenses declining (-1.7% q-o-q vs +2.0% q-o-q in Q4 2024), whereas operating income witnessed a growth of 3.2% q-o-q, which led to improvement in C/I ratio by 149bps to 29.8%.
Net Interest Margin (NIM) fell by 7bps at 2.87%, in line with the Saudi Central Bank SAMA cutting the repo rate by 50bps during the last quarter of 2024, the report said.
Asset quality improved for the Saudi banks as the NPL ratio continued to decline to 1.03% (vs. 1.05% in Q4’24), despite falling coverage ratios. The Return on Equity (RoE) improved by 44bps q-o-q to 15.3% while Return on Assets (RoA) improved marginally to 2.1%.
The Kingdom’s GDP is expected to grow by 3.6% y-o-y with 3% y-o-y growth expected from oil activities, despite the delay in oil output reaching its normal levels due to OPEC+ production cuts. GDP from non-oil activities to grow by 4.3% y-o-y.
“The Kingdom’s ongoing pursuit of economic diversification will maintain ongoing execution of an extensive range of Vision 2030 projects that span all sectors of the Saudi economy. As such, non-oil activities GDP is set to contribute significantly to the resurgence in top-line economic growth in FY2025,” the report noted.
Net Loans & Advances
The Net loans and advances (L&A) picked up pace to +5.4% QoQ in Q1 2025, from 3.3% in Q4 2024 and this growth was driven by corporate lending which increased 7.5% q-o-q as against 3.4% in Q4 2024).
The aggregate deposits of the banks rebounded to increase by 4% q-o-q in the first quarter as against -1.3% q-o-q in Q4 2024), led by an increase in term deposits (8.1% q-o-q), while CASA deposits witnessed a moderate growth of 2.1% q-o-q, the report said.
Aggregate total interest income decreased by 1% q-o-q in Q1 2025 (vs. +1.2% q-o-q in Q4 2024) and the total interest expenses declined by 3.7% q-o-q in q1 2025 compared with 0.7% q-o-q decline in Q4 2024.
During this quarter, banks witnessed growth in non-interest income by 9.6% q-o-q (vs. 5.6% q-o-q decline in Q4 2024), the report said.
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