Saudi bank lending to grow, but at slower pace: S&P

S&P Global Ratings says banks are likely to focus on lending to small and medium-sized enterprises

S&P Global Ratings expects Saudi banks’ lending growth to continue, although at a slower pace, as reprioritization of Vision 2030 projects moderates financing demand despite still requiring substantial funding.

In a report, the agency said banks are likely to focus on lending to small and medium-sized enterprises. It added that Saudi lenders’ key challenge will be funding this growth.

The rating agency said rising foreign investor risk aversion may weigh on Saudi banks’ ability to secure external funding, which has expanded in recent years to offset slower domestic deposit growth. However, continued increases in government-related deposits could partly mitigate the risk.

The agency said the Middle East war and smaller-than-expected interest rate cuts may weigh on foreign-currency issuance volumes, adding that Saudi residential mortgage-backed securities still offer significant opportunities.

S&P expects global Islamic finance growth to slow to about 5%-10% in 2026, after expanding 10.2% in 2025, citing the impact of the Middle East war.

The agency added that the conflict has weakened economic growth prospects across most GCC countries, expecting to reduce growth opportunities for banking systems, including Islamic lenders.