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The aggregate net income of Saudi’s top 10 listed banks grew 5.3% q-o-q in 3Q 2024 to SAR 20.5 bn, supported by higher non-interest income and cost efficiency, according to global consulting firm Alvarez & Marsal’s (A&M) Saudi Arabia Banking Pulse 3Q report (pdf).
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Meet the banks: Saudi National Bank (SNB), Al Rajhi Bank, Riyad Bank, Saudi Awwal Bank (SAB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Bank Albilad, Saudi Investment Bank (SIB), and Bank Aljazira (BJAZ) were included in the third quarter line up. A&M’s quarterly Baking Pulse report gives the rundown on the financial performance of the top 10 listed banks in the Kingdom by assets, highlighting their income, profitability, size, liquidity, risk, and capital.
Operating income rose 6.0% q-o-q, on the back of a 3.5% uptick in net interest income (NII) and a 15.2% increase in non-interest income. Five out of the 10 surveyed lenders reported an improvement in cost efficiency, while operating expenses grew by 4.9% — slower than the increase in operating income. Meanwhile, aggregate impairment charges were up 30.4% q-o-q, offsetting some of the gains in profitability.
Despite Sama cutting interest rates in step with the US Federal Reserve, net interest margins (NIM) remained stable at 2.9%, snapping a three-quarter streak of contraction. The spread between yield on credit and cost of funds was up 10 bps q-o-q at 5.1%. Other profitability measures showed stability or growth, with return on equity up 56 bps at 17.4% and return on assets holding steady at 2.0%.
Loans and advances (L&A) were up 3.7% q-o-q, overtaking deposit growth (+1.4% q-o-q). The uptick in loan book growth drove a 2.3 percentage point q-o-q increase in the loan-to-deposit ratio to 100.1%. Corporate and wholesale lending were the primary drivers for the bump in L&A, growing 4.4% q-o-q. The category now accounts for some 56.1% of total loans and advances, while retail credit (+2.7% q-o-q) represents 43% of total L&A.
ICYMI: Finance Minister Mohammed Al Jadaan expects interest rates to continue to decline into next year, yielding upshots for consumers, private sector investments, and homeownership. The Saudi state also intends to benefit from decreased cost of borrowing by issuing loans to bridge budget deficits.
Cost of risk deteriorated in 3Q: The cost of risk increased by 7 basis points q-o-q to 0.35% on the back of higher impairment charges. Six out of the 10 surveyed banks reported an increase in their cost of risk, with SAB leading the pack with a 30 bps q-o-q bump to 0.49%. Meanwhile, Alinma and Albilad saw the most substantial improvement in their risk profiles during the period, with their costs of risk falling 27 bps at 0.42% and 11 bps at 0.20%.
