‏Top 10 Saudi banks’ net profits surge 9.3% in Q3 as interest income rises: Report

RIYADH: The aggregate net profit of Saudi Arabia’s top 10 banks increased by 9.3 percent to SR16.5 billion ($4.39 billion) in the third quarter of 2022, compared to the previous three months, as rising interest income boosted their performance, an analysis done by professional services firm Alvarez & Marsal showed.

Ten of the largest listed banks it analyzed include Saudi National Bank, Al Rajhi Bank, Riyad Bank, Saudi British Bank, Banque Saudi Fransi, Arab National Bank, Alinma Bank, Bank Albilad, Saudi Investment Bank, and Bank Aljazira.

In its report, ‘Saudi Arabia Banking Pulse for Q3’, Alvarez & Marsel noted that the aggregate net interest income of these 10 banks increased by 15.9 percent in the third quarter that ended in September.

This comes as Saudi Arabia’s central bank, known as SAMA, raised its repo and reverse repo rates by 150 basis points quarter-on-quarter in the third quarter, to 3.75 percent and 3.25 percent respectively.

This was in line with the US Federal Reserve’s move to tame surging inflation and maintain price stability.

On Nov. 3, SAMA increased its Repo rate once again by 75 bps to 4.50 percent while also increasing the Reverse Repo rate to 4 percent, following the US Federal Reserve’s decision to raise rates by 75 basis points to curb inflation.

“We expect SAMA to continue matching policy rate hikes by the US Federal Reserve, which will help boost the overall banking sectors’ NIMs (net interest margin),” said Asad Ahmed, managing director and head of Middle East financial services at Alvarez & Marsal.

He added: “Overall, rising interest rates, improvement in asset quality and strong economic rebound are positives for the banking sector in Saudi Arabia.

"The profitability growth is expected to continue for KSA banks as the interest rate outlook remains in an upward trajectory.”

The analysis showed that aggregate loans and advances at the end of the third quarter grew 2.9 percent from the previous quarter, continuing to outpace the 0.02 percent growth in deposits quarter on quarter.

According to the report, the operating income increased by 4.9 percent quarter-on-quarter, primarily driven by growth in total interest income mainly due to higher interest rates.

The report further noted that the loan-to-deposit ratio in these banks continued to increase for the seventh consecutive quarter by 2.6 percent, to settle at 96.2 percent in the July to September period.

Saudi National Bank topped the list of banks in terms of assets, as it holds assets worth SR964.4 billion as of the third quarter of 2022.

It was followed by Al Rajhi and Riyad Bank with assets worth SR740.6 billion and SR347.9 billion respectively, the report added.

Earlier this month, another report by Kamco Invest revealed that Al Rajhi Bank recorded a profit of $1.2 billion in the third quarter, supported by higher net financing and investment income, fees from banking services, and exchange income.

The Kamco Invest report further noted that Saudi National Bank reported a 24.6 percent increase in the net profit to $1.3 billion, driven by a 16.1 percent drop in operating expenses due to a lower net impairment charge for credit losses.