Saudi Arabia’s banking sector recorded a 3.7 percent sequential increase in loans and advances in the third quarter of 2024, driven by a 4.4 percent surge in corporate and wholesale banking, according to Alvarez & Marsal.

Deposit growth lagged behind, rising 1.4 percent during the same period, as credit demand continued to outpace deposit mobilization.

“The continued positive performance in the third quarter of 2024 reflects a balance of growth and improved cost efficiencies among Saudi banks. Profitability has increased primarily due to an increase in non-interest income amid a moderate rise in impairment charges,” Asad Ahmed, managing director of A&M Financial Services, said.

He added: “As the Saudi Central Bank maintains interest rates in line with the US Fed, potential further rate cuts in the coming quarters are likely to affect interest margins. Focus on non-interest income and improved cost efficiencies will remain central going forward.”

Time deposits grew by 4.2 percent, underscoring the high-interest rate environment. The loan-to-deposit ratio exceeded 100 percent, indicating that credit demand outpaced deposit mobilization.

Operating income increased by 6.0 percent during the quarter, driven by a 15.2 percent rise in non-interest revenue. This contributed to an overall improvement in the cost-to-income ratio, which fell by 31 basis points to 31.0 percent.

Net income rose by 5.3 percent, reaching SR20.5 billion, even as impairment charges surged by 30.4 percent.

The Saudi Central Bank reduced repo rates by 50 basis points in line with the US Federal Reserve’s actions. Despite this, net interest margins remained steady at 2.95 percent, supported by an 18-basis-point increase in the yield on credit to 8.6 percent and a slight rise in the cost of funds to 3.5 percent.

Saudi Arabia’s Vision 2030 continues to drive non-oil economic growth, spurring consumer spending, tourism, and construction activities.

Financial institutions are also prioritizing digital transformation. For example, Al Rajhi Bank’s acquisition of a controlling stake in “Drahim,” a management platform, highlights the growing integration of traditional banking and fintech.

According to the report, Saudi banks are well-positioned for sustainable growth as they focus on enhancing non-interest income and operational efficiency in a dynamic economic environment.

While geopolitical challenges and oil market fluctuations present risks, the Kingdom’s banking sector remains resilient, playing a key role in advancing the broader economic objectives outlined in Vision 2030.