Aljazira Capital: Saudi banks’ profits in Q1 hit record, Al-Rajhi Bank leads in asset quality

Aljazira Capital revealed that the Saudi banking sector achieved record profits of SAR 22.2 billion in the first quarter of 2025, an increase of 19.4% compared to the same quarter of the previous year and 6.3% compared to the previous quarter. Seven of the 10 listed banks achieved profits above average expectations. Profit before provisions for the sector in the first quarter of 2025 increased by 14.5% compared to the same quarter of the previous year. The growth in net profit was driven by an 11.1% improvement in net interest income in the first quarter of 2025 compared to the same quarter of the previous year, to SAR 29.6 billion, supported by a 16.5% and 14.8% increase in loans and investments during the same period, respectively. According to the report, the quality of credit assets and operational efficiency in the sector continued to improve. The non-performing loan ratio in the sector improved during the first quarter of 2025 compared to the same quarter of the previous year by 18 basis points and 3 basis points compared to the previous quarter to 1.24%. The coverage ratio decreased by 396 basis points compared to the same quarter of the previous year and 470 basis points compared to the previous quarter, reaching 126.9%. The cost of risk decreased in the first quarter of 2025 compared to the same quarter of the previous year by 13 basis points and 2 basis points compared to the previous quarter to 36 basis points. According to Aljazira Capital, Al Rajhi Bank continued to lead the sector in terms of asset quality, with its non-performing loan (NPL) ratio declining by 3 basis points compared to the same quarter of the previous year to 0.75%. Meanwhile, Saudi First Bank continued to record the highest NPL ratio in the sector during the first quarter of 2025, at 2.8%, despite a significant improvement, decreasing by 58 basis points compared to the same quarter of the previous year. The sector’s cost-to-income ratio improved by 183 basis points compared to the same quarter of the previous year, decreasing by 148 basis points compared to the previous quarter, to 29.8%. This was due to a 12.8% increase in operating profit during the same period, while operating expenses increased by 6.3%. The growth in operating profit was supported by an 11.1% increase in net interest income compared to the same quarter of the previous year, and a 19.1% increase in non-profit income. In contrast, the sector’s net interest margin declined by 11 basis points to 3.04% during the first quarter of 2025 compared to the same quarter of the previous year. Net loans and advances increased by 16.5% compared to the same quarter of the previous year and by 5.4% compared to the previous quarter. Overall, the monthly average of mortgage loans increased by 25.6% during the first quarter of 2025 compared to the same quarter of the previous year to SAR 9.3 billion, compared to SAR 7.4 billion in the first quarter of 2024. Total deposits increased by 6.5% compared to the same quarter of the previous year and by 4.0% compared to the previous quarter to SAR 2,790 billion.

According to the report, the share of demand deposits decreased by 59 basis points compared to the same quarter of the previous year (a decrease of 101 basis points compared to the previous quarter) to 57.2%. The regulatory loan-to-deposit ratio increased by 423 basis points (bps) compared to the same quarter of the previous year, while declining by 55 bps compared to the previous quarter to 82.7%. The decrease in the regulatory loan-to-deposit ratio compared to the previous quarter was due to sukuk issuances, which remain within the regulatory limit. The sector’s non-performing loan ratio improved by 18 bps compared to the same quarter of the previous year and 3 bps compared to the previous quarter to 1.24%. The coverage ratio decreased by 396 bps compared to the same quarter of the previous year and 470 bps compared to the previous quarter to reach 126.9%. The cost of risk decreased by 13 bps compared to the same quarter of the previous year and 2 bps compared to the previous quarter to 26 bps. The sector’s cost-to-income ratio improved by 183 basis points (148 basis points) to 29.8% during the first quarter of 2025 compared to the same quarter of the previous year, due to a 12.8% increase in operating profit during the same period, while operating expenses increased by 6.3%.