PHOTO
The logo of the Saudi National Bank (SNB) can be seen at a branch in Riyadh on March 27, 2023, after the chairman of SNB, the main shareholder of troubled lender Credit Suisse which was bought out this month, resigned. (Photo by Fayez Nureldine / AFP).
The Saudi Real Estate Refinance Company (SRC) has signed a 3.4 billion riyals ($907 million) agreement with Saudi National Bank (SNB) to acquire a mortgage portfolio, in a deal in which the largest bank in the kingdom is able to free up its capital and the mortgage refinance provider drives forward its agenda to infuse liquidity into the system.
SRC, owned by the Public Investment Fund (PIF), the Saudi sovereign wealth fund, is mandated to increase the availability of affordable housing finance options for Saudis. In providing Shariah-compliant refinancing and balance sheet management solutions to primary mortgage financiers, it has been buying up mortgage books from banks and finance companies in recent years. Late last year, it acquired a SAR 1 billion mortgage portfolio from Bidaya Finance. In 2023, the kingdom’s biggest Islamic lender Al Rajhi Bank by mortgage assets and market capitalisation, sold a portfolio of real estate loans to SRC for over SAR 5 billion.
For their part, Saudi banks are looking to offload mortgages off their books as liquidity tightens in the banking system with deposits lagging loan growth.
“For SNB, these are long duration fixed rated loans, and the bank may be using the high interest environment to exit, hopefully at a better price. However, the sale would not have a major impact on SNB’s overall book, considering they account for less than 2% of its mortgage book,” Chiradeep Ghosh, a banking analyst at Bahrain-based SICO Bank, told Zawya.
Mortgage lending has surged in Saudi Arabia the past decade, often outpacing corporate lending, after the kingdom introduced regulations. It gained momentum in 2016 on the back of a government drive to boost home ownership to 70% under the Vision 2030 programme. Saudi Arabia aims to expand the mortgage finance sector by SAR 500 billion by 2030, reaching SAR 1.3 trillion. The kingdom’s mortgage market was approximately SAR 800 billion in 2024, up from SAR 200 billion in 2018 and accounts for 23% of total bank assets.
Saudi National Bank is a key player in the mortgage market with 27% market share. Al Rajhi Bank is the largest with 40% market share.
“From SRC’s point of view, they are securing fixed rated loans and are likely to lock assets before an interest rate cut,” said Ghosh.
In addition, infusing liquidity into the banking system may also be one of their criteria, he added.
The PIF-owned SRC is also charged with developing Residential Mortgage-Backed Securities (RMBS), enhancing market liquidity and activity, while increasing its attractiveness to local and international investors.
Majeed Al-Abduljabbar, CEO of SRC, said: “This strategic agreement with SNB reflects our shared vision to build a resilient and liquid housing finance ecosystem in Saudi Arabia. By providing liquidity and establishing a robust securitization framework, we are laying the foundation for a sustainable mortgage market that supports Saudi citizens in achieving homeownership.”
SRC sold its debut $2 billion sukuk last month under its London Stock Exchange-listed $5 billion global sukuk program.
(Reporting by Brinda Darasha; editing by Seban Scaria)
