Fitch: Saudi banks will maintain stable profitability in 2025

Fitch Ratings, the international credit rating agency, expects Saudi banks to maintain stable profitability in 2025. Saudi banks recorded net income of SAR 21.5 billion ($5.7 billion) in the fourth quarter of 2024, up from SAR 20 billion in the previous three months, according to Fitch Ratings. This improvement is primarily attributed to lower interest rates, which have boosted net profit margins, along with strong lending growth expected to outperform Gulf peers in 2025.

Fitch’s forecasts are consistent with Standard & Poor’s Global forecasts issued in January, which indicate that banks in the Kingdom will maintain stable profitability in 2025, as higher lending volumes will offset lower margins, while continuing to tap international capital markets to achieve growth linked to the Kingdom’s Vision 2030.

The agency estimates that the average net interest margin for Saudi banks will rise to 3.2% in the fourth quarter of 2024, from 3.1% in the first nine months of the year.

This improvement follows a 12 basis point drop in banks’ cost of funding to 3.2% after the central bank cut interest rates by 50 basis points. Meanwhile, the return on average income-earning assets remained stable at 6.3%. This increase in profits was supported by strong growth and a lower cost of risk, which declined to 30 basis points from 40 basis points the previous year, reflecting a healthy operating environment. Lending activity remained strong, expanding by SAR 87 billion in the fourth quarter of 2024. Al Rajhi Bank led this growth with an increase of SAR 44 billion, distributed equally between the retail and corporate sectors.

It is worth noting that Saudi banks listed on the stock market saw their profits rise by the end of 2024, reaching SAR 79 billion, compared to approximately SAR 69 billion in 2023, a 14.5% increase. In terms of the highest total profits, the National Commercial Bank (NCB) led with SAR 21.1 billion by the end of 2024, compared to SAR 20 billion by the end of 2023. Al Rajhi Bank followed with SAR 19.72 billion by the end of 2024, compared to SAR 16.62 billion in 2023. Riyad Bank followed with SAR 9.32 billion, compared to SAR 8.04 billion in 2023. First Saudi Bank followed with SAR 8.07 billion, compared to SAR 7 billion in 2023.

Alinma Bank’s net profit also rose to SAR 5.83 billion, compared to SAR 4.83 billion in 2023. Arab National Bank’s net profit reached SAR 4.96 billion, compared to SAR 4.07 billion in 2023. Banque Saudi Fransi’s net profit rose to SAR 4.54 billion, compared to SAR 4.22 billion in 2023.

Al Bilad Bank’s net profit also increased by SAR 2.8 billion, compared to SAR 2.8 billion. 2.3 billion riyals in 2023, the Saudi Investment Bank 1.9 billion riyals compared to 1.7 billion riyals in 2023, and finally, Bank Aljazira with 1.2 billion riyals in 2024 compared to 1 billion riyals in 2023.