The Banking Executive Magazine - August Issue

Saudi Arabia’s Banking Sector Saudi Arabia’s Banking Sector PROFIT RISES TO $6.1BLN, BEATS ESTIMATES Saudi Arabia’s banking sector posted an 18% year-on-year (YoY) increase in net profit to 22.9 billion Saudi riyals ($6.1 billion) in the second quarter of 2025, beating consensus estimates of SAR22.3 billion, accord- ing to Al Rajhi Capital. The earnings momentum was mainly led by Al Rajhi Bank and Saudi Na- tional Bank. Lending rose 16% YoY, outpacing deposits and pushing the loan-to-de- posit ratio (LDR) to 106%, led by Riyad Bank, Saudi Awwal Bank (SAB), Alinma Bank and Al Rajhi Bank. Net interest margins (NIMs) nar- rowed sequentially due to tighter liq- uidity conditions and rising competition in the corporate loans. The 2025 guidance was mixed for banks. Six out of nine banks that con- ducted earnings calls downgraded their NIM guidance, citing tighter liq- uidity conditions, lesser rate cuts than anticipated, and higher compe- tition in corporate financing. Most lenders expect one or two rate cuts by year-end, while diversifying funding through debt instruments. Banks are also expected to prioritise profitability over loan growth. The seasonal slowdown in the third quar- ter and corporate repayments in the fourth quarter will weigh on loan growth in the second half of the year. Despite weaker oil prices, most banks reported that non-performing assets were under control, with solid recoveries in the first half of 2025. They confirmed ample headroom to absorb the Saudi Central Bank’s 1% countercyclical capital buffer effec- tive from 2026, the report stated. the BANKING EXECUTIVE 38 ISSUE 200 AUGUST 2025