#Saudi banks likely to remain profitable in 2023 – A&M

Saudi banks likely to remain profitable in 2023 – A&M

Saudi Arabia’s banks are likely to remain on a profitable path in 2023 with continued credit growth, and higher interest rates resulting in migration of current and savings accounts towards term deposits.

The Saudi Central Bank (SAMA) will also continue extending tenors for its support packages and other facilities to avoid a credit crunch, according to Alvarez & Marsal’s (A&M) 2022 Saudi Arabia Banking Pulse 2022.

Higher credit demand, better asset yield and operating efficiencies drove the top Saudi lenders’ profitability in 2022 amidst rising benchmark interest rates, the bank said, with the aggregate net income increasing by 28.4% year on year (YoY) to SAR 62.7 billion ($16.7 billion).

Banks saw high credit growth during the year, with deposits inching up further on strong economic momentum and investments, pushing the loan-to-deposit ratio to 96.7%.

This can largely be attributed to demand for personal loans and real estate activities, the report said, adding that the banks’ credit growth stood at 14.4% YoY, while deposits grew by 8.3% YoY.

The growth of loans and advances (L&A) significantly outpaced that of deposits, with the total growth for the top 10 banks growing at 14.4% YoY, whereas aggregate customer deposits increased by 8.3%.