Saudi Arabia’s banking sector remains well capitalized, reflecting stiff regulatory requirements and strong profitability, credit ratings agency Fitch ratings said in a recent report.
Saudi banks have one of the highest weighted average common equity Tier 1 ratio globally; their profitability has been resilient and remains a rating strength. This is underpinned by strong franchises, cheap funding and limited competition.
However, the soft operating environment and subdued GDP growth in Saudi Arabia are challenges to credit demand as the economy remains highly oil-dependent, despite the government's diversification efforts.
In addition, asset quality metrics continue to suffer from weak consumer confidence and low credit demand, in particular from large government-related entities and the slow pipeline of government projects.
Elsewhere, non-performing loan (NPL) ratios have been rising but still remain low by international standards.
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