Saudi banks to continue tapping global debt markets: S&P Global

The flag of the Kingdom of Saudi Arabia is illustrated

S&P Global said it expects Saudi banks to continue tapping international debt markets to raise the funding needed for Vision 2030.

In a report, the agency noted that Saudi banks will keep benefiting from the momentum generated by the Kingdom’s economic transformation and non-oil growth, with expansion still driven by corporate lending supported by Vision 2030 opportunities.

It added that growth in domestic deposits is no longer sufficient to fund asset expansion in Saudi Arabia, prompting a rebound in external funding across the banking system.

S&P said external debt in Saudi Arabia continues to rise, with the share of foreign debt to total debt increasing as of Sept. 30, 2025, compared with year-end 2024.

“We also note positively that the contribution of less-stable interbank funding dropped to 47% of total foreign liabilities as of Sept. 30, 2025, from 59% at year-end 2024,” it added. It noted that a substantial portion of this funding is backed by Saudi banks’ investments in securities, which helps mitigate risk to some extent.

It also highlighted an increase in hybrid instruments, with Additional Tier 1 capital averaging 22% of reported common equity as of Sept. 30, 2025. S&P attributed this to shareholders and other investors being less willing to inject core equity and more interested in receiving predictable, recurring income from hybrid instruments.