Al Rajhi Capital: Saudi Bank Credit Demand Steady; Strong Profits, Real Estate Loan Growth Exceeds Expectations

Al Rajhi Capital reported that October 2024 credit demand across Saudi banks remains robust, with corporate credit showing particular strength. The firm highlighted the sustained growth in mortgage loans as a standout positive, marking a continuation of this year’s upward trend.
Mortgage loans reached SAR 8.1 billion in October, accelerating from SAR 6.8 billion in September and surpassing the SAR 6.8 billion recorded in October 2023. The 2024 average monthly lending stands at SAR 6.9 billion, a 6.5% year-on-year increase.
Profits before Zakat and Tax for October totaled SAR 7.7 billion, reflecting a 23.7% year-on-year increase and a slight 1.5% decline month-on-month. In September, profits had risen 9.4% year-on-year and 3.6% month-on-month.
According to Al Rajhi Capital, year-to-date (YTD) profits are up 14% year-on-year despite a sharp rise in the time deposit mix to its highest level in 2024. Strong asset returns in Q3, increased contributions from non-funded income and subsidiaries, and continued optimism surrounding loan growth have alleviated concerns over tight liquidity conditions and funding costs.

Credit and Deposit Trends
Credit growth in October was robust at 1.1% month-on-month and 12.5% year-on-year, compared to September’s 1.0% month-on-month and 12.2% year-on-year gains. Lending to the private sector increased 0.9% month-on-month and 12.1% year-on-year. Corporate loans—calculated as total bank credit minus retail loans—grew 1.0% month-on-month and 15.8% year-on-year.
However, total deposits declined by 0.4% month-on-month, though they were up 9.2% year-on-year, following two months of outperforming credit growth. This drop was attributed to a sharp 5.1% decline in quasi-cash deposits. Demand deposits continued to shrink, reaching 52.6% of the total mix, while time deposits increased by 102 basis points month-on-month to 35.8%, driven by growth in private time deposits. Interbank liabilities also decreased by 9.6% month-on-month.

Liquidity and Consumer Spending
Al Rajhi Capital noted that the loan-to-simple loan ratio in the banking system increased by 150 basis points to 106.4%. The loan-to-adjusted loan ratio, as calculated by the Saudi Central Bank, rose by 107 basis points to 80.7%.
Consumer spending also demonstrated strong growth, rising 10.5% year-on-year in October to SAR 121.5 billion, compared to an 8.4% year-on-year increase in September. Cash withdrawals grew 4.3% year-on-year in October, reaching SAR 47.5 billion, compared to a 2.2% year-on-year increase in September.
The data underscores continued resilience in the Saudi banking sector, with strong credit demand, solid profit performance, and a positive outlook for loan growth.