Saudi banks power economic confidence

Saudi Arabia’s financial system continues to demonstrate notable resilience at a time when global markets remain shaped by uncertainty, tighter monetary conditions, and uneven growth prospects. 

Strong liquidity buffers, expanding credit activity, and accelerating digital adoption are reinforcing confidence in the Kingdom’s banking sector and its ability to support economic transformation under Vision 2030.

Recent data from a Saudi Central Bank report highlight the strength of domestic liquidity conditions and banking activity. Broad money supply (M3) rose 6.9 percent year on year in October 2025, reaching SR3.1 trillion ($836.9 billion), underscoring the depth and stability of funding available within the financial system.

The expansion was driven largely by time and savings deposits, which climbed to SR1.2 trillion, signaling a sustained increase in savings by households and businesses. This shift has bolstered bank liquidity, enabling lenders to expand credit to both private- and public-sector borrowers—an essential driver of economic growth.

The Saudi Central Bank, also known as SAMA, itself maintained a solid financial position, with total assets increasing 6.6 percent year on year to SR1.9 trillion in October 2025. Growth was supported by stronger performance in key asset classes, particularly foreign currency holdings and deposits placed with banks abroad.

Reserve assets stood at SR1.65 trillion, up 1.6 percent from a year earlier. The increase was primarily driven by an 8.2 percent rise in foreign currency holdings and overseas bank deposits, reflecting sustained financial resilience and reinforcing the Kingdom’s long-term macroeconomic stability.

Saudi Arabia’s banking sector also continued to expand steadily, with total assets reaching SR4.9 trillion in October—an increase of 13.2 percent year on year. While lending growth continued to outpace deposits, the loan-to-deposit ratio remained prudent at 80.81 percent, only marginally higher than the same period last year. To bridge funding gaps, banks increasingly diversified their financing sources through bond issuances and external borrowing.

Credit activity remained robust, with claims on the private sector rising 12 percent year on year to SR3.14 trillion. Mortgage lending continued its upward trajectory, increasing 10.8 percent to around SR938 billion in the third quarter of 2025.

Financing to small and medium-sized enterprises surged to SR420.7 billion in the second quarter of 2025, marking a sharp 36.9 percent annual increase. SMEs’ share of total bank credit rose from 9 percent in Q2 2024 to 10.8 percent a year later—an encouraging development aligned with Vision 2030’s ambition to raise SME financing from 2 percent to 20 percent by 2030.

Capital strength and profitability indicators further underscore the sector’s soundness. In October 2025, capital and reserves accounted for 18.82 percent of total deposits, comfortably above regulatory requirements. Aggregate net income before zakat and taxes rose to SR85.5 billion, up 16.7 percent from SR73.3 billion a year earlier.

Household credit demand also strengthened. In the third quarter of 2025, consumer loans totaled SR476.6 billion, while credit card lending reached SR33.4 billion, rising 3.1 percent and 10.3 percent year on year, respectively.

Islamic banking continued to post strong gains, reflecting rising demand for Sharia-compliant products. In Q2 2025, Islamic banking assets reached SR3.6 trillion, while total financing and deposits stood at SR2.6 trillion and SR2.4 trillion, recording annual increases of 14 percent, 14.9 percent, and 11.1 percent.

The shift toward digital finance remained pronounced. The number of ATMs declined to 14,768 in October 2025 from 15,217 a year earlier, while bank-issued cards surged to 61.9 million from 50.1 million — highlighting the rapid transition toward card-based and digital payments.

Electronic payments continued to gain momentum, with point-of-sale transactions reaching SR59.9 billion in October and transaction volumes exceeding 1 billion, supported by a nationwide network of 2.3 million terminals. E-commerce activity also expanded, as Mada card transactions climbed to SR30.7 billion, reflecting stronger consumer confidence in digital platforms.

Taken together, these indicators point to a financial system that is not only stable but increasingly adaptive. Strong liquidity, resilient banks, and accelerating digitalization are reinforcing the foundations of Saudi Arabia’s economic transformation, positioning the financial sector to remain a critical enabler of growth in the years ahead.

• Talat Zaki Hafiz is an economist and financial analyst.

X: @TalatHafiz