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Four of the nation’s seven largest banks saw their portfolio of non-performing loans dip last year, but an increase in NPLs at three of the seven saw the collective figure rise 32% year-on-year, financial information service Mubasher reports after an analysis of the lenders’ financial statements.
The seven institutions: Saudi National Bank (SNB), Al Rajhi Bank, AlJazira Bank, Banque Saudi Fransi, Bank Albilad, Alinma Bank, and Arab National Bank (ANB). Together, they held NPLs worth SAR 13 bn at the end of last year, Mubasher says.
A high NPL to total loans ratio suggests rising credit risk and will generally see banks take steps to tighten credit requirements and start collecting receivables.
In context: Total NPLs at all seven of the banks are (very) comfortably within safety margins.
ANB saw the largest uptick in NPLs in percentage terms, with the figure rising 5x y-o-y to SAR 1.5 bn in 2023. Saudi Fransi followed with a 3x uptick to SAR 4.2 bn, while the NPLs of SNB grew 85% y-o-y to SAR 3.9 bn.
Alinma kept a tight rein on the quality of its assets, with NPLs clocking in at just SAR 826 mn last year, down from SAR 1.1 bn in 2022. AlJazira followed with a 37% y-o-y decline to SAR 192 mn, while Al Rajhi saw a 31% y-o-y drop in NPLs to SAE 3.1 bn and Albilad saw an 11% fall to SAR 290 mn.
Non-performing loans to individuals rose 14% last year at the seven banks studied to close at SAR 4.8 bn, or about 37% of the total portfolio of non-performing assets held by the seven banks. Only Al Rajhi and SNB saw year-on-year drops in the value of NPLs written to individual borrowers.
What do banks do with NPLs? First off, they try to collect. When that fails, they could look to negotiate restructured terms with borrowers at terms and on a timeline that could make repayment feasible or write the loans off entirely, taking a charge on their books that acknowledges the loss. Lenders also take provisions, taking reversible charges against facilities that are overdue.
