Saudi Press

Saudi Arabia and the world
Sunday, Jun 01, 2025

Corporate sector demand to drive loan growth for Saudi banks

Corporate sector demand to drive loan growth for Saudi banks

Saudi banks are expected to witness higher loan growth this year and beyond driven by increased demand for corporate loans as the Kingdom is forecasted to register strong gross domestic product growth, stated a recent report by Al Rajhi Capital. 
The Riyadh-based financial services provider analyzed the Kingdom's top 10 banks and has raised its total loan growth estimates for the industry for 2022 and 2023 to 14 percent and 12 percent, respectively. 

This is up from the previously estimated growth rate of 13 percent and 11 percent for the same period.  

Al Rajhi has also made major changes to its loan growth estimates for 2024 and 2025 – which it believes will grow by around 11 percent, up from previously estimated 9 percent and 7 percent. 

“The loan growth in the banking system continues to surprise us on the upside,” said the report, adding that the 10 banks under its coverage reported an aggregate loan growth of 16 percent in the third quarter of 2022.  

At the same time, it pointed out the latest data from SAMA for the month of October indicated the continuation of this momentum, with total loans in the system up 16 percent year-on-year.  

On the flip side, however, Al Rajhi Capital has trimmed its net interest margin expansion estimates for 2023 to a 12-basis points expansion year-on-year from 64 bp before. 

The finance firm has kept its estimates for mortgages unchanged while reducing them for personal finance loan growth numbers. 

Based on the data available for the first nine months of 2022, the report stated that mortgages continue to be the key driver for the banking sector’s loan growth. At the same time, it added that personal loans’ rate of growth has also been on a decelerating trend, from almost 15 percent year-on-year in the first quarter of 2022 to 9 percent in the third quarter of 2022.  

However, Al Rajhi noted that corporate loans have been on an accelerating trend from 9 percent and 10 percent year-on-year growth in the first quarter and second quarter of 2022, respectively, to 13 percent growth in the third quarter of 2022.  

Analysts at Al Rajhi continue to believe that corporate loans would be the key driver for total loan growth going forward, backed by the Kingdom’s small and medium enterprises sector which has been benefitting from various governmental measures. 

“Going forward, we believe the mid and large corporate loan category to see higher uptick from 2023 onwards, particularly from H2 2023, supported by implementation of Giga projects and many other initiatives under vision 20230,” the report noted.  

Saudi Arabia is currently implementing a number of initiatives under the national investment strategy, including the Shareek program, the National Strategy for Industry and Agriculture – all of which are expected to improve the investment environment in the Kingdom. 

While the banking sector is up for improved performance, the ongoing volatility in the market means the Tadawul banking index is taking a significant beating, falling by 10 percent since the end of September, 2022.  

Over the last two months, Al Rajhi noted that the fundamental factors were mixed for the banking sector with the tight liquidity situation resurfacing again in October and November, while monthly data from SAMA indicated strong loan growth and third-quarter results showing healthy profit growth. 

Despite some improvement in the liquidity situation, the report pointed out that the banks have not recovered much of their recent losses. At the current levels, the dividend yield of the sector has reached around 4 percent based on the 2023 estimate.  

“Further, if we assume credit growth to remain healthy, then the current market price levels assume hardly any net interest margin expansion for the next two-three years,” Al Rajhi Capital said.
Newsletter

Related Articles

Saudi Press
0:00
0:00
Close
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
European and Arab Ministers Convene in Madrid to Address Gaza Conflict
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
UAE Offers Free ChatGPT Plus Subscriptions to Citizens
Lebanon Initiates Plan to Disarm Palestinian Factions
Iran and U.S. Make Limited Progress in Nuclear Talks
The Daily Debate: The Fall of the Dollar — Strategic Reset or Economic Self-Destruction?
Trump Administration's Tariff Policies and Dollar Strategy Spark Global Economic Debate
OpenAI Acquires Jony Ive’s Startup for $6.5 Billion to Build a Revolutionary “Third Core Device”
Turkey Weighs Citizens in Public as Erdoğan Launches National Slimming Campaign
Saudi-Spanish Business Forum Commences in Riyadh
Saudi Arabia and Spain Sign MoU to Boost SME Sectors
UK Suspends Trade Talks with Israel Amid Gaza Offensive
Iran and U.S. Set for Fifth Round of Nuclear Talks Amid Rising Tensions
Russia Expands Military Presence Near Finland Amid Rising Tensions
Indian Scholar Arrested in Crackdown Over Pakistan Conflict Commentary
Israel Eases Gaza Blockade Amid Internal Dispute Over Military Strategy
President Biden’s announcement of advanced prostate cancer sparked public sympathy—but behind closed doors, Democrats are in panic
A Chinese company made solar tiles that look way nicer than regular panels!
Indian jet shootdown: the all-robot legion behind China’s PL-15E missiles
The Chinese Dragon: The True Winner in the India-Pakistan Clash
Australia's Venomous Creatures Contribute to Life-Saving Antivenom Programme
The Spanish Were Right: Long Working Hours Harm Brain Function
Did Former FBI Director Call for Violence Against Trump? Instagram Post Sparks Uproar
US and UAE Partner to Develop Massive AI Data Center Complex
Apple's $95 Million Siri Settlement: Eligible Users Have Until July 2 to File Claims
US and UAE Reach Preliminary Agreement on Nvidia AI Chip Imports
President Trump and Elon Musk Welcomed by Emir of Qatar Sheikh Tamim with Cybertruck Convoy
Strong Warning Issued: Do Not Use General Chatbots for Medical, Legal, or Educational Guidance
Saudi Arabia Emerges as Global Tech Magnet with U.S. Backing and Trump’s Visit
This was President's departure from Saudi Arabia. The Crown Prince personally escorted him back to the airport.
NVIDIA and Saudi Arabia Launch Strategic Partnership to Establish AI Centers
Trump Meets Syrian President Ahmad al-Shara in Historic Encounter
Trump takes a blow torch to the neocons and interventionists while speaking to the Saudis
US and Saudi Arabia Sign Landmark Agreements Across Multiple Sectors
Why Saudi Arabia Rolled Out a Purple Carpet for Donald Trump Instead of Red
Elon Musk Joins Trump Meeting in Saudi Arabia
Trump says it would be 'stupid' not to accept gift of Qatari plane
Quantum Computing Threatens Bitcoin Security
Michael Jordan to Serve as Analyst for NBA Games
×