Due to growing reliance on external borrowing and fiercer competition for deposits, banks were able to retain profitability in spite of rising funding costs. Strong credit quality was cited by Alvarez & Marsal as a crucial component bolstering profitability in 2024. RIYADH: Alvarez & Marsal claim that solid asset quality, increased cost effectiveness, and strict credit management helped Saudi Arabia’s banking industry show resilience in 2024.
A&M KSA Banking Pulse 2024 research by Arab News revealed that banks were profitable in spite of growing financing costs, which were driven by heightened competition for deposits and a greater dependence on borrowing from outside sources. This evaluation is based on important financial measures described in the report, such as net interest margin, cost-to-income, and loan-to-deposit, which show how banks are managing cost structures, liquidity constraints, and profitability.
Lower interest rates have had a mixed effect on bank earnings in the Kingdom, according to a second analysis from Fitch Ratings that was released alongside the A&M report. “Due to the ongoing tightening of liquidity conditions and intense competition for funding, Saudi banks’ performance metrics, especially net interest margins, will see only limited improvement from the interest rate cuts that began in 2024,” the agency stated.
Rate reductions encourage loan growth, which increases revenue from larger credit volumes, but margins are being squeezed by fierce competition for liquidity. In order to remain competitive, banks are lowering lending rates while keeping deposit rates appealing in order to attract capital.
Also Read:
Saudi Arabia’s Grade is Raised by S&P Due to a Sustained Economic Move Away From Oil
Malaysia, Kyrgyzstan, and Indonesia all Host lavish iftar Meals hosted by Saudi Arabia
