Saudi National Bank Leads Earnings Surge in Q1 2024

Saudi Arabia's top banks have reported a significant 8% increase in earnings in the first quarter of 2024, reaching SR18.65 billion ($5 billion) compared to the same period last year. This growth can be attributed to factors such as an 11% rise in lending and a rising interest rate environment that has led to higher credit costs.

Recent data from the Saudi Central Bank indicates that loans have surpassed SR2.67 trillion by the end of March, outpacing the 8% growth in deposits. Despite higher interest rates, credit facilities across the Gulf Cooperation Council countries have expanded in Q1 2024, showcasing the resilience of the financial sector.

The increase in lending mirrors a broader trend of economic expansion and investment in the Gulf region, highlighting the strength and stability of the financial systems. Each GCC country has seen significant lending growth, reflecting a robust project pipeline.

Forecasts by S&P Global predict a strong credit growth of 8 to 9% for Saudi banks in 2024, primarily driven by corporate lending initiatives under the Vision 2030 program. Moody's Investors Service has maintained a positive outlook for Saudi Arabia's banking sector, citing efforts in economic diversification and the growth of loans for low-risk government projects as key drivers.

Moody's also anticipates low nonperforming loan ratios and strong capital ratios for Saudi banks, positioning them favorably in the Middle East region. The Saudi government's plans to inject deposits into the banking system are expected to further bolster credit expansion in the Kingdom.

Among the top 10 banks, Saudi National Bank reported the highest earnings at SR5.04 billion, followed by Al Rajhi Bank at SR4.41 billion. Saudi Arabia has dominated Forbes 2024 MENA's 30 most valuable banks list, with Al Rajhi Bank leading in market value growth.

Despite contributing only 7% of total revenues, Alinma Bank saw a remarkable 36% surge in earnings, attributed to diverse income streams. Saudi banks are gearing up to adopt alternative funding strategies to meet the growing demand for new mortgages, alongside maintaining access to international capital markets.

The positive earnings growth of Saudi Arabia's leading banks in Q1 2024 reflects a robust financial sector amidst economic expansion and investment in the region. With forecasts pointing towards continued credit growth and supportive government initiatives, Saudi banks are well-positioned for further success in the coming months.