Q1 2023 KSA Banking Pulse: Saudi’s biggest banks experience steady earnings growth, profitability stable: Alvarez & Marsal

Q1 2023 KSA Banking Pulse: Saudi’s biggest banks experience steady earnings growth, profitability stable: Alvarez & Marsal

- Moderate growth witnessed in both lending and customer deposits

- Profitability expected to taper down in the coming quarters

Kingdom of Saudi Arabia - Leading global professional services firm Alvarez & Marsal (A&M) has released its latest Saudi Arabia (KSA) Banking Pulse for Q1 2023. The report highlights profitability for the top 10 lenders in the Kingdom continues to be affected by slower growth in operating income and higher impairment charges. Despite improvement in the cost-to-income (C/I) ratio by 146 basis points (bps) QoQ, higher impairment charges of 14.4 percent QoQ resulted in only a marginal growth in profitability, with net profit increasing by 2.7 percent from Q4’22 to SAR 17.3bn.

Return on equity (RoE) declined by 67 bps QoQ to 15.2 percent, while return on assets (RoA) remained stable at 2 percent. Loans & advances (L&A) increased by 3.2 percent QoQ mainly driven by growth in corporate / wholesale banking (+4.2 percent QoQ). Deposits increased by 4.7 percent QoQ, reporting highest growth in time deposits (+6.1 percent QoQ). Operating income increased by 4.1 percent QoQ, primarily driven by growth in non-core income (+19.0 percent QoQ) but the full impact was lower given the slower growth in total net interest income (+0.5