Saudi banks see moderate improvement in margins and return on equity in third quarter: Alvarez & Marsal

Saudi banks see moderate improvement in margins and return on equity in third quarter: Alvarez & Marsal

Top 10 lenders demonstrate resilience with a 2.9 percent quarter-on quarter (QoQ) increase in operating income, fueled by robust net interest income growth.

Moderated credit growth is anticipated in Q4’2023, underscoring a positive economic outlook, driven by non-oil sectors and sustained government spending.

Kingdom of Saudi Arabia: - Leading global professional services firm Alvarez & Marsal (A&M) has released its latest Saudi Arabia (KSA) Banking Pulse for Q3 2023. The report highlights growth in net profits recorded among the Kingdom’s lenders with higher operating income and lower impairment charges. Operating income increased by 2.9 percent QoQ, majorly due to net-interest income (NII) growth (+3.8 percent QoQ) but was undermined by a marginal decline in non-core income (-0.5 percent QoQ). Recoveries in impairment charges (-17.9 percent QoQ) supported growth in net profits (+3.8 percent QoQ) to SAR 18.0bn.

The loan-to-deposit (LDR) ratio improved by 2.3 percent QoQ on the back of higher loans-and-advances (L&A) growth to reach 98.4 percent, representing the highest level seen in the last 4 years.

Return on equity (RoE) improved by 70bps QoQ to 16.4 percent, while return on assets (RoA) remained stable at 2 percent. KSA banks witnessed moderate growth in both lending and deposit