Strong credit demand drives Saudi banks’ earnings: Analysts

Al Rajhi Bank and SNB led major lenders’ earnings growth in the first quarter

Most Saudi banks that disclosed Q1 2026 results beat analyst estimates by a margin, an Argaam survey showed.

Al Rajhi Bank’s Q1 profit rose 14% to SAR 6.75 billion, while Saudi National Bank (SNB) posted a 7% growth to SAR 6.42 billion.

Riyad Bank, Arab National Bank (ANB), Banque Saudi Fransi (BSF), and Bank Albilad reported growth at a slower pace, while Bank AlJazira recorded around 12% profit rise to SAR 405 million.

The continued growth in banks’ profit, despite higher interest rates, reflects strong demand for credit, analysts surveyed by Argaam said. The main challenge, however, lies in banks’ ability to maintain efficient cost-to-income ratios, they noted.

Difference in Earnings

Saad Althagfan, economic analyst and board member of the Saudi Economic Association

Saad Althagfan, Economic Analyst and Board Member at Saudi Economic Association, believes that continued growth in banks’ profit, despite higher interest rates, reflect stronger demand for credit.

This, he said, is backed by non-oil economic growth, which underpins asset quality and curbs credit risks.

Higher deposit costs, along with the increased cost of sukuk and bonds issued recently by banks, weigh on profitability despite loan growth, Althagfan noted, expecting the credit portfolio to continue expanding but at a limited single-digit pace.

Rania Qanaba, Banking Sector Financial Analyst at Alpha MENA

Rania Qanaba, Financial Analyst at Alpha MENA, underlined that Riayd Bank’s and SNB’s first-quarter operating performance was driven by recovery operations.

Revenue growth, however, was lackluster and is expected to decline over the coming period amid slower loan growth. “The key challenge lies in banks’ ability to maintain efficient cost-to-income ratios.”

Continued recovery operations will remain a supportive factor for profitability in the short term, she added.

Additionally, results of both SNB and Riyad Bank underscore slower loan growth compared to 2025, along with expected weaker revenue over the coming quarters, particularly net special commission income.

Non-interest income growth also slowed, implying pressure on banks’ operating revenue in the coming periods.

Liquidity and Deposits

On liquidity, Althagfan ruled out a notable deposit outflow even if geopolitical tensions persist. Data showed continued deposit growth, he said, describing a major decline scenario as unrealistic.

The central bank intervenes when needed to inject liquidity into the banking sector through various tools, he added.

On the other hand, Qanaba said liquidity pressures remain a key challenge, but a scenario involving a 10% deposit outflow is considered pessimistic given the limited share of foreign deposits.

She also pointed to possible localized pressure emerging from competition for deposits. The central bank will likely intervene by cutting the reserve requirement ratio (RRR) and expanding repurchase tools, alongside reallocating public-sector deposits.

Asset Quality and Credit Risks

On credit, Althagfan said loan growth and asset quality remain the two key factors for banks’ performance. He indicated that the sector enjoys high asset quality and lower non-performing loans (NPLs), which reduces the need for large provisions allocation.

He also expects the corporate segment to lead lending growth, backed by economic expansion and higher demand from companies.

Qanaba, meanwhile, highlighted slower credit growth year-to-date, with this trend expected to accelerate amid weak financing demand, especially in the real estate sector. This was also reflected in the slump of the new housing mortgage for individuals since February.

This slowdown may be partly offset by higher demand for working capital financing from companies as a result of supply chain disruptions.

She said loan growth will continue to be supported by Saudi Vision 2030 projects, alongside continued focus on financing small and medium-sized enterprises (SMEs), whose share of total loans has remarkably risen in recent years, backed by lower credit risk government programs.

Interest Rate Impact

Qanaba forecast the markets to adopt a wait-and-see approach, with expectations for rate cuts potentially returning in H1 2026, especially if geopolitical conditions improve. Lower interest rates could support some banks depending on their funding structure.

Sector Outlook

Looking ahead, Qanaba expects banks to report slower growth during 2026 due to margin pressure and higher credit-loss provisions. Meanwhile, improved operating efficiency may help ease these pressures and support continued profit growth at a moderate pace.