RIYADH: In the backdrop of a looming global banking crisis, Saudi lenders continue to maintain strong credit growth driven by corporate loans.
This has helped banks operating in the Kingdom record an aggregate year-on-year net profit of 7.5 percent to SR5.18 billion ($1.38 billion) in February 2023, the latest official data showed.
In February 2022, the aggregate profit of Saudi banks was SR4.82 billion, noted the Saudi Central Bank, also known as SAMA, in its monthly report issued on Tuesday.
On a month-on-month basis, however, the aggregate profit of banks, was down 19 percent in February, against January’s SR6.41 billion.
A research report prepared by Al Rajhi Capital, which has analyzed the SAMA monthly data, attributed this modest growth in profits to the ongoing pressure on the cost of funding.
“Mortgage origination came in at SR7.1 billion, lower than January, but slightly better than our expectations,” stated Al Rajhi Capital, a company that is authorized to engage in securities activities in Saudi Arabia.
Al Rajhi said its updated estimate for monthly mortgage origination for 2023 is SR6.8 billion, which is a bit lower than the previous estimate of SR7.0 billion.
The SAMA report noted that loans given to the private sector in February rose over 11 percent year-on-year to SR2.32 trillion.
Based on these figures, Al Rajhi analysts expect Saudi banks’ loan growth to be around 10 percent in 2023, which they said, is on the conservative side as “we see upside risks to it.”
This comes as the combined deposits of Saudi banks rose by 8 percent year-on-year to SR2.30 trillion in February.
Al Rajhi analysis noted that total deposits in the month of February grew 1.2 percent month-on-month, higher than credit growth of 0.9 percent, which the analysts said: “should ease some pressure on the funding side going forward.”
The apex bank data showed that the aggregate assets of banks in the Kingdom rose by more than 11 percent year-on-year to SR3.66 trillion in February.
Whereas, the total assets held by SAMA increased by SR830 million month-on-month to SR1.92 trillion in February 2023.
This is when compared with February 2022 grew by SR130.4 billion.
SAMA’s investments in foreign securities, which account for 55 percent of its total assets, declined by around 7 percent to SR1.04 trillion in February.
The SAMA report further revealed that the foreign direct investment inflow in Saudi Arabia was SR29.6 billion in 2022, thus bringing the cumulative FDI balance in the Kingdom to SR1.8 trillion.
The rise of FDI in Saudi Arabia clearly indicates the Kingdom’s growing popularity as a global investment hub, a goal outlined in Vision 2030.
The report, however, added that the Kingdom’s FDI in 2022 witnessed a 60 percent fall compared to 2021. This massive figure of net FDI in 2021 was primarily attributed to a $12.4 billion infrastructure deal between Aramco and a global investor consortium, in which the consortium acquired a 49 percent stake in Aramco Oil Pipelines Co.
Excluding this mammoth transaction, FDI inflows in 2022 increased by 14.5 percent compared to the year earlier, the SAMA report noted.