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30-03-23

Saudi Banks Record Strong Credit Growth Despite Global Banking Crisis

(MENAFN) Despite the looming global banking crisis, Saudi banks continue to maintain strong credit growth driven by corporate loans. The latest official data from the Saudi Central Bank (SAMA) shows that banks operating in the Kingdom recorded an aggregate year-on-year net profit of 7.5 percent to SR5.18 billion (USD1.38 billion) in February 2023. This is a significant increase from the SR4.82 billion recorded in February 2022. However, on a month-on-month basis, the aggregate profit of banks was down 19 percent in February compared to January's SR6.41 billion.

A research report by Al Rajhi Capital, which analyzed the SAMA monthly data, attributed this modest growth in profits to the ongoing pressure on the cost of funding. The report noted that mortgage origination came in at SR7.1 billion, slightly better than their expectations but lower than January. Al Rajhi Capital's updated estimate for monthly mortgage origination for 2023 is SR6.8 billion, which is slightly lower than their previous estimate of SR7.0 billion.

Despite the lower mortgage origination, loans given to the private sector in February rose over 11 percent year-on-year to SR2.32 trillion. Based on these figures, Al Rajhi analysts expect Saudi banks' loan growth to be around 10 percent in 2023, which they consider a conservative estimate.

The combined deposits of Saudi banks rose by 8 percent year-on-year to SR2.30 trillion in February, while total deposits in the month of February grew 1.2 percent month-on-month, higher than credit growth of 0.9 percent. This should ease some pressure on the funding side going forward.

The SAMA report also revealed that the aggregate assets of banks in the Kingdom rose by more than 11 percent year-on-year to SR3.66 trillion in February. Whereas, the total assets held by SAMA increased by SR830 million month-on-month to SR1.92 trillion in February 2023, compared to February 2022's growth by SR130.4 billion.

The rise of FDI in Saudi Arabia indicates the Kingdom's growing popularity as a global investment hub, a goal outlined in Vision 2030. The SAMA report revealed that the foreign direct investment inflow in Saudi Arabia was SR29.6 billion in 2022, bringing the cumulative FDI balance in the Kingdom to SR1.8 trillion. However, the report added that the Kingdom's FDI in 2022 witnessed a 60 percent fall compared to 2021, primarily attributed to a USD12.4 billion infrastructure deal between Aramco and a global investor consortium. Excluding this, FDI inflows in 2022 increased by 14.5 percent compared to the previous year.
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