
Saudi Arabia’s banking sector has achieved a significant milestone, with bank loans reaching SR2.93 trillion ($782 billion) in November. This marks a 13.33% year-on-year increase, the highest growth rate in 22 months, driven primarily by robust corporate lending.
Corporate Loans Drive Growth
According to the Saudi Central Bank (SAMA), corporate loans surged by 17.28% to SR1.58 trillion, the highest annual growth since 2021. Real estate activities led the charge, accounting for 21% of corporate lending and growing by 32% to SR328 billion.
The wholesale and retail trade sector followed, representing 13% of corporate lending at SR201.6 billion, with a 10.62% annual growth rate. Meanwhile, the manufacturing sector, a cornerstone of Vision 2030’s diversification goals, contributed 12%, reaching SR182.44 billion.
Key Sectors Show Strong Momentum
Electricity, gas, and water supplies also saw remarkable growth, increasing by 27.74% to SR178.56 billion, representing 11% of total corporate lending. Professional, scientific, and technical activities, though a smaller share at 0.53%, experienced the most significant surge, growing 54.44% to SR8.38 billion.
Education loans followed closely, rising by 29.93% to SR8 billion, reflecting the Kingdom’s focus on human capital development. On the personal loans front, the sector grew by 9.05% annually to SR1.35 trillion, underscoring consumer confidence and economic diversification efforts.
Global Outlook and Economic Diversification
Standard Chartered’s Global Market Outlook for 2025 predicts lower interest rates will boost private sector growth, particularly in Saudi Arabia, the UAE, and Qatar. Despite a projected global growth slowdown from 3.2% to 3.1%, the Gulf Cooperation Council (GCC) remains a bright spot, driven by non-oil sector expansion and strategic investments.
Saudi Arabia’s Vision 2030 continues to fuel economic transformation, with coordinated efforts across government, financial institutions, and private enterprises. Sectors like education, science, technology, and utilities are gaining momentum, supported by substantial funding aimed at enhancing their GDP contribution.
The surge in real estate activity aligns with the Kingdom’s infrastructure and giga-projects, reinforcing its development agenda. Recent adjustments in global monetary policy, mirrored by SAMA’s interest rate changes, are expected to make borrowing more affordable, further stimulating lending and supporting key industries.
Banking Sector Resilience
SAMA data reveals Saudi banks’ regulatory capital to risk-weighted assets stood at 19.2% in Q3 2024, slightly down from 19.5% a year earlier but well above the Basel Committee’s 8% minimum requirement. The Tier 1 capital ratio reached 17.7%, reflecting the banking sector’s strength in supporting economic growth while mitigating risks.
The International Monetary Fund (IMF) highlights Saudi banks’ resilience, noting their ability to withstand severe macroeconomic shocks. Stress tests confirm their capacity to handle liquidity shocks, though the IMF recommends addressing funding concentration risks and enhancing credit risk modeling.
Improving Loan Quality
Additionally, SAMA data for Q3 2024 shows non-performing loans net of provisions to capital fell to 2.1%, down from 2.2% in the same period last year. This improvement reflects better lending portfolio quality and effective provisioning strategies.
Moreover, the IMF also notes that fixed-rate mortgages and salary-assigned loans mitigate credit risks, with 80% of retail borrowers being government employees, ensuring stable income during economic downturns.
Saudi Arabia’s corporate lending boom underscores the Kingdom’s economic resilience and diversification efforts under Vision 2030. With strong banking sector fundamentals and strategic investments, the nation is well-positioned to sustain growth and achieve its ambitious transformation goals.