Saudi banks are expected to remain profitable in 2025 due to stronger credit growth, according to S&P
Saudi banks are expected to stay profitable in 2025, helped by lower interest rates and a strong economy that will boost lending, according to an S&P Global Ratings report.
Saudi Banking Sector
Corporate lending is expected to be the main factor driving credit growth, supported by many ongoing projects. Lower interest rates could also boost mortgage lending.
Overall, lending growth is predicted to stay strong at around 10%, mostly because of corporate lending related to Vision 2030 projects.
Non-performing loans (NPLs) are expected to increase to 1.7% of total loans in 2025, up from 1.3% in September 2024. However, large loan write-offs are not expected.
Saudi banks are expected to continue using international capital markets to support growth tied to Vision 2030.
Surprising Fact
In the third quarter of 2024, Saudi banks saw a 3.7% increase in loans and advances, mainly due to a 4.4% growth in corporate and wholesale banking.
Tangent
Credit losses are expected to reach 50-60 basis points in the next 12-24 months, thanks to banks’ strong provisions, according to the S&P report.
Non-Oil Growth
Vision 2030 is expected to drive growth in sectors outside of oil, especially in construction and services, due to rising consumer demand and a growing workforce.
In December, Saudi Arabia’s non-oil private sector saw strong growth, driven by high domestic demand and increased exports, despite a slight slowdown in overall growth.
The Riyad Bank Saudi Arabia Purchasing Managers’ Index (PMI), compiled by S&P Global, fell slightly to 58.4 in December from a 17-month high of 59 in November. The index still stayed well above the 50.0 mark, indicating strong growth.
Published: 27th January 2025
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