Saudi banking sector’s growth still fueled by corporate lending: S&P

The corporate lending will remain the key driver of the Saudi banking sector's growth, while credit risks in the corporate sector are still under control, according to S&P Global Ratings.

The total credit to the private corporate sector increased by 60% over 2020-2024, while credit to listed Saudi companies rose by a slower 10%-12%, driven by utilities, real estate, healthcare, and transportation (excluding Saudi oil giant Aramco), stated S&P in a report.

Despite growing corporate debt and the likelihood of high funding needs in the run-up to 2030, S&P Global Ratings expects Saudi banks' exposure to corporate credit risk to remain contained thanks to a moderate improvement in corporate leverage.

S&P also noted that the relatively low levels of public and private debt in Saudi Arabia, supported by large sovereign reserves, provide a strong buffer that reinforces financial stability. It added that, as the non-oil economy continues to expand, banks will need to strike a balance between growth opportunities and prudent risk management, ensuring that credit expansion supports economic diversification without amplifying risks.

The agency also expects the credit quality of rated corporates to remain relatively stable, despite rising financing needs for capital expenditures, investments, digital transformation, and industrial diversification. This stability, it explained, is primarily driven by non-oil growth opportunities created under Vision 2030 and solid profitability supported by cost optimization.