RIYADH: The aggregate income of Saudi Arabia’s top ten banks jumped by 34 percent in the first quarter compared to the previous three months, Alvarez & Marsal (A&M) said in a report.
The banks benefited from improving macroeconomic conditions, buoyant capital markets and a marked decline in impairments, A&M’s Saudi Arabia Banking Pulse revealed. It could set the stage for more mergers in the sector according to the consultancy.
“Looking ahead, credit growth is likely to be driven by continuous strength in mortgage lending and a pick-up in corporate credit demand in the second half of 2021, as the economic activity continues to improve,” said Asad Ahmed, A&M managing director and head of Middle East financial services. “Corporate lending is expected to gain traction as the Public Investment Fund’s (PIF) plans to invest $40 billion into the economy annually until 2025, to support business activity."
He said that following the merger of Saudi banking titans NCB and Samba, other lenders in the Kingdom would also look to consolidate their position and improve their capital base.
Loans and advances increased by 5 percent in the first quarter while deposit growth slowed to 2.2 percent in the same period. The lending picked up on the back of mortgage financing in the retail sector driven by government initiatives to increase home ownership, A&M said.
The cost of risk across all the banks fell to its lowest level in the last five quarters from 1.3 percent in the fourth quarter of last year to 0.6 percent in the first quarter of this year.
Total impairments fell by half as the banks saw a reversal of some bad loans that had previously been set aside during the pandemic.