The banking sector in Saudi Arabia is expected to play a central role mainly in achieving the goals of Vision 2030, said Asad Ahmed, Managing Director and Head of Financial Services in the Middle East at Alvarez & Marsal.
“We expect a positive outlook for Saudi banks with prospective loan growth, improving asset quality and well-capitalized books,” he said in a report on the performance of the banking sector in 2023.
Given the upcoming scenario of interest rate cuts by the second half of 2024, Ahmed said net interest margins are forecast to remain stable at around 3% during the year.
The report underscored the stability and growth potential of the Saudi banking sector, which has shown remarkable operating income growth and an uptick in return on equity.
“Despite some challenges in the economic landscape, the industry has adeptly navigated through, leveraging favorable credit conditions. Our analysis reflects the sector’s enduring stability and promising upward trajectory, reinforcing our optimism for its future.”
Ahmed said that 2023 witnessed liquidity coming under relative pressure as loan growth outpaced deposit growth amidst the high-interest rates.
During the year, GRE deposits reached a record high at 31.2% of total bank deposits, compared to 28.4% in 2022, accounting for 68.2% of the total deposit increase last year. The resulting increase in money supply in the economy helped moderate the liquidity conditions in the Saudi Arabian banking system.
According to data available with Argaam, the aggregate profit of Saudi banks rose by about 12% to SAR 69.96 billion in 2023 from SAR 62.52 billion in 2022.
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