Saudi banks have achieved a remarkable milestone, with their aggregate profit before zakat and tax reaching an all-time high of SR7.83 billion ($2.1 billion) in July. This represents a substantial 23 percent annual increase, according to newly released data.
Steady Growth in Profits and Deposits
The Kingdom’s central bank (SAMA) reported that from January to July, banks reported profits totaling SR50.22 billion, up 13% from SR44.5 billion in 2023. During this period, total deposits grew by 8%, reaching SR2.64 trillion. Term deposits led the growth with a 20% increase, totaling SR930.24 billion.
Demand accounts, which represent 53% of total deposits, rose by 5%, bringing the total to SR1.4 trillion. On the asset side, total bank credit rose by 12%, reaching SR2.79 trillion in July compared to last year. The loans-to-deposits ratio climbed to 80.73%, up from 78.84% in July 2023.
Economic Conditions Fuel Growth
The expansion of Saudi Arabia’s banking sector is driven by favorable economic conditions and strategic initiatives. High oil prices and strong government spending have created a robust environment, enabling banks to support the Kingdom’s giga-projects and Vision 2030 goals. The economic backdrop has also boosted non-oil GDP, further supporting banking performance.
Fintech’s Role in Transformation
The rise of fintech is reshaping the banking landscape in Saudi Arabia. SAMA plays a crucial role by regulating the sector, ensuring innovation thrives within a secure framework. Initiatives like the open banking framework and regulatory sandbox are driving technological advancements that enhance efficiency and improve financial inclusion.
Interest Rates and Competition Intensify
Higher interest rates have boosted banks’ profits from loans. However, competition for borrowers has intensified as financial institutions seek to grow their market share. McKinsey’s research highlights the importance of meeting the expectations of young, tech-savvy consumers. This strategy offers a significant advantage in a competitive landscape.
Tech and AI Transform Banking
Banks across the GCC are digitizing their customer journeys, transforming both retail and corporate services. Saudi and UAE banks are reimagining services like personal loans, home financing, and corporate credit renewals. Advanced technologies, including AI, are enhancing customer self-service, reducing reliance on assisted channels, and improving operational efficiency.
