• Loans & Advances (L&A) increased by 3.7 percent QoQ, driven by corporate/wholesale banking.
  • Banks navigating interest rate cuts and regional tensions.

Kingdom of Saudi Arabia – Leading global professional services firm Alvarez & Marsal (A&M) today released its latest KSA Banking Pulse for Q3 2024. The report shows that the ten largest Saudi banks reported a 3.7 percent quarter on quarter (QoQ) increase in Loans & Advances (L&A), driven by a 4.4 percent rise in corporate and wholesale banking. Deposits grew by 1.4 percent QoQ, led by a 4.2 percent increase in time deposits.

Operating income rose by 6.0 percent QoQ, primarily due to a 15.2 percent growth in non-interest income (NII), despite a slight 3.5 percent increase in net interest income. Impairment charges increased moderately by 30.4 percent, while net income grew by 4.5 percent QoQ.

Key prevailing trends identified for Q3 2024 are as follows: 

  1. Loans & Advances (L&A) of the main Saudi banks grew by 3.7 percent quarter on quarter (QoQ), primarily driven by a 4.4 percent QoQ growth in corporate/wholesale banking. Deposits increased by 1.4 percent QoQ, with term deposits seeing the highest growth at 4.2 percent QoQ. Consequently, the loans-to-deposit ratio (LDR) increased by 2.3 percentage points QoQ to 100.1 percent in Q3’24.
  2. Operating income increased by 6.0 percent QoQ to SAR 36.9bn in Q3’24, mainly due to a 15.2 percent QoQ growth in non-interest income to SAR 8.6bn. Net interest income (NII) increased marginally by 3.5 percent QoQ to SAR 28.3bn. Other operating income (+32.7 percent QoQ) led the growth in non-interest income.
  3. Aggregate net interest margin (NIM) remained stable at 2.95 percent in Q3’24. Yield on credit increased by 18 basis points QoQ to 8.6 percent, while the cost of funds increased by 14 basis points QoQ to 3.5 percent.
  4. Cost-to-income (C/I) ratio improved by 31 basis points QoQ to reach 31.0 percent in Q3’24. This was due to a higher rise in operating income (+6.0 percent QoQ) compared to operating expenses (+4.9 percent QoQ).
  5. The cost of risk worsened by 7 basis points QoQ to settle at 0.35 percent in Q3’24 from 0.28 percent in Q2’24. All the top four banks witnessed a worsening in the cost of risk.
  6. Aggregate net profit of KSA banks increased by 5.3 percent QoQ to SAR 20.5bn in Q3’24 due to non-interest income growth (+15.2 percent QoQ), resulting in a 6.0 percent QoQ growth in total operating income. The increase in net income resulted in RoE expanding to 17.4 percent (+0.6 percentage points QoQ) while RoA remained consistent at 2.0 percent for the quarter.

OVERVIEW

The table below sets out the key metrics:

CATEGORY

METRIC

Q2’ 24

Q3’24

Size

Loans and Advances Growth (QoQ)

3.2%

3.7%

Deposits Growth (QoQ)

2.3%

1.4%

Liquidity

Loan-to-Deposit Ratio (LDR)

97.8%

100.1%

Income & Operating Efficiency

Operating Income Growth (QoQ)

1.9%

6.0%

Operating Income / Assets

3.6%

3.7%

Non-Interest Income / Operating Income

21.4%

23.2%

Yield on Credit (YoC)

8.4%

8.6%

Cost of Funds (CoF)

3.4%

3.5%

Net Interest Margin (NIM)

2.9%

2.9%

Cost-to-Income Ratio (C/I)

31.3%

31.0%

Risk

Coverage Ratio

164.0%

167.2%

Cost of Risk (CoR)

0.3%

0.4%

Profitability

Return on Equity (RoE)

16.8%

17.4%

Return on Assets (RoA)

2.0%

2.0%

Return on Risk-Weighted Assets (RoRWA)

2.6%

2.7%

Capital

Capital Adequacy Ratio (CAR)

19.4%

19.2%

Source: Financial statements, investor presentations, A&M analysis

Asad Ahmed, A&M Managing Director, Financial Services commented, “The continued positive performance in Q3 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.

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

Methodology: 

A&M’s KSA Banking Pulse examines data of the 10 largest listed banks in the Kingdom, comparing the Q3 2024 results against Q2 2024 results. Using independently sourced published market data and 16 different metrics, the report assesses banks’ key performance areas, including size, liquidity, income, operating efficiency, risk, profitability, and capital.

The country’s 10 largest listed banks analyzed in A&M’s KSA Banking Pulse are Saudi National Bank (SNB), Al Rajhi Bank, Riyad Bank (RIBL), Saudi British Bank (SABB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Bank Albilad (BALB), Saudi Investment Bank (SIB) and Bank Aljazira (BJAZ).

About Alvarez & Marsal 

Founded in 1983, Alvarez & Marsal is a leading global professional services firm. Renowned for its leadership, action and results, Alvarez & Marsal provides advisory, business performance improvement and turnaround management services, delivering practical solutions to address clients' unique challenges. With a world-wide network of experienced operators, world-class consultants, former regulators and industry authorities, Alvarez & Marsal helps corporates, boards, private equity firms, law firms and government agencies drive transformation, mitigate risk and unlock value at every stage of growth.

To learn more, visit: AlvarezandMarsal.com.