meed-logo

line1 line2 line3
SIGN IN / REGISTER

Saudi banks track more modest growth path

15 September 2023

MEED's October 2023 special report on Saudi Arabia also includes: 

> Gigaproject activity enters full swing
> Infrastructure projects support Riyadh’s logistics ambitions
> Aramco focuses on upstream capacity building
> Saudi chemical and downstream projects in motion
> Riyadh rides power projects surge
> Jeddah developer restarts world’s tallest tower

 

Surging oil prices may have imbued the kingdom with a renewed sense of economic purpose, but the situation for banks is more complicated.

Economic conditions – notably the higher interest rate climate – have made life more challenging for lenders. They have been acquainting themselves with normality in 2023, after two post-Covid years in which the increase in profit yields averaged 30 per cent.

This year, Saudi bank metrics are solid rather than spectacular. Second-quarter net profits for the country’s 10 listed banks declined by 0.3 per cent in quarter-on-quarter terms to SR17.4bn ($4.64bn), according to figures from Alvarez & Marsal.

Fitch Ratings expects average sector financing growth to slow this year, although remaining above the GCC average of a forecast 5-6 per cent.

According to Junaid Ansari, head of Investment Strategy & Research at Kamco Invest, Saudi Arabia still recorded the strongest growth in outstanding credit facilities during the second quarter of 2023 at 2.5 per cent in quarter-on-quarter terms, while growth in Kuwait, Qatar, Bahrain and Oman was below 1 per cent.

Growth drivers

Aggregate credit facilities in Saudi Arabia grew 5.2 per cent on the start of the year to reach SR2.5tn ($670bn).

“Real estate was the biggest sector in terms of total lending in Saudi Arabia, accounting for 30 per cent of total bank credit facilities and 61 per cent of personal facilities during the second quarter,” says Ansari, citing Saudi central bank data from Bloomberg. 

“Lending growth at Saudi banks is still high, albeit decreasing,” says Anton Lopatin, senior director at Fitch Ratings.

“Fitch is forecasting it to be 12 per cent for the whole year 2023, compared to 14 per cent last year. This is partially because mortgage financing affordability has decreased due to higher interest rates and also state subsidies have been tightened.”

Strong demand for mortgage financing, underpinned by a state subsidy programme, has supported the financing growth of Saudi banks in recent years, says Fitch.

Mortgage financing reached SR567bn ($151bn) at the end of the first quarter of 2023, with a compound average growth rate of 35 per cent over the past five years.

But Fitch sees financing growth moderating in Saudi Arabia.

“In the first six months of this year, deposit growth was above lending growth and that wasn’t the case in 2022,” says Lopatin, who points out that if banks’ funding base is growing faster than financing, that reduces pressure on liquidity.

Liquidity levels

Broadly speaking, liquidity is still healthy in Saudi Arabia. Low-cost current account and savings account (Casa) deposits in Saudi Arabia are still among the highest in the GCC, and there is a strong cash-rich government behind the banks in case of need.

After some liquidity tightening in 2022, the Central Bank (Sama) placed SR50bn ($13.3bn) of deposits in the banking sector to reduce the pressure.

“This is a Saudi-specific issue, reflecting that banks’ financing books are growing faster than deposits, and that is putting pressure on liquidity,” says Lopatin.

Casa deposits remain high in the kingdom, even though rising interest rates have led some customers to shift into term deposits. In the first quarter of 2023, Casa deposits still accounted for 56 per cent of total deposits, whereas two years ago the figure was 65 per cent.

“One reason for this [9 per cent decline] is the higher interest rates, but it’s also because banks have been competing for funding to support their growth. There is a huge increase in the cost of funding, but the margin is still very healthy, and the average net interest margin for the first quarter was 3.2 per cent,” says Lopatin.

Despite the higher cost of borrowing – and the attendant risk that this could force clients to default on loans – this should be manageable for most lenders.

“We believe that with adequate controls and policies, asset quality is not a concern at present for the Saudi banking sector,” says Kamco’s Ansari.

“The cost of risk for the sector has been consistently declining over the last quarters and stood at 44 bps, one of the lowest over the last several quarters. This also remains well below the GCC average of 66 bps.”

Loan health

Another source of comfort for Saudi banks is that the higher interest rates are applied to new loans while older loans remain at pre-decided fixed rates.

As a result, non-performing loans (NPLs) are not expected to see any steep increase in the coming quarters – especially, notes Ansari, in light of expectations of rate cuts from next year.

“In the first quarter of 2023, the average NPL ratio was stable at around 2 per cent, and the cost of risk was about 50 bps, which is rather low,” says Lopatin.

In construction and real estate, this could become an issue if higher interest rates result in higher borrowing costs for these companies.

“Not all of them operate with very healthy margins. Thus, their debt service capability will deteriorate. But as of now, we do not see significant upticks in cost of risk or sector average NPL ratios,” says Lopatin.

If Saudi banks are forced to reduce their exposure to real estate, there should be other opportunities for them to grow loan books – not least the Vision 2030-linked series of gigaprojects looking for support. Some of the Saudi banks whose balance sheets have expanded following mergers are now better placed to fund infrastructure projects.

According to the IMF, while mortgage growth has recently moderated, demand for project-related and consumer loans is expected to remain strong, helping offset the impact on profitability from rising funding costs linked to higher policy rates.

This may take a while to materialise. “As of now, we see only moderate financing for companies participating in the execution of the new gigaprojects in Saudi Arabia, but over the longer term, this will support banks’ lending growth,” says Lopatin.

There are other benefits to supporting these projects, not least with the government being the ultimate guarantor, which is positive from an asset quality perspective. 

With a strengthening oil price expected to underpin a Saudi economic renaissance, there should be many more opportunities for growth-oriented Saudi banks to get their teeth into.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11139548/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Aramco defers bid submissions for Safaniya onshore project

    5 February 2026

     

    Saudi Aramco has postponed the bid submission deadline for a project to construct onshore surface facilities to boost productivity at the Safaniya offshore oil field development in Saudi Arabia.

    The Safaniya field is the world’s largest offshore oil field, with a production capacity of nearly 1.2 million barrels a day (b/d). Discovered in 1951, the field is located in the Gulf waters, approximately 265 kilometres north of Aramco’s headquarters in Dhahran.

    Aramco has pushed back the bid submission deadline for the Safaniya onshore surface facilities project until 17 March, according to sources. The earlier bid submission date was 31 January.

    Aramco issued the main tender for engineering, procurement and construction (EPC) works on the Safaniya onshore surface facilities project on 9 July last year. Contractors were initially given deadlines of 24 October and 7 November to submit technical and commercial bids for the project, MEED previously reported.

    Prior to that, Aramco is understood to have issued the solicitation of interest document for the Safaniya field onshore surface facilities project in May, with contractors submitting responses by 28 May.

    The EPC scope of work has been divided into two packages:

    • Package 1 – Water treatment and injection plant:
      • Building new water injection units
      • Expansion of gas-oil separation plant one
      • Building storage tanks, transfer pumps and substation
      • A central processing facility at the Zuluf field development, including water transfer pumps, chemical injection skids and other components
         
    • Package 2 – Produced water utilities:
      • Fire water system
      • Potable water units
      • Utilities
      • Nitrogen generation system
      • Site buildings
      • Electrical infrastructure
      • Security systems
      • Telecommunications networks

    In addition to pursuing the onshore facilities project to boost Safaniya’s productivity, MEED also previously reported about Aramco issuing three key offshore tenders last year for the field’s next expansion phase.

    Contractors in Aramco’s Long-Term Agreement pool of offshore service providers submitted bids for the three tenders – Contracts Release and Purchase Order (CRPO) numbers 154, 155 and 156 – by 31 August. Aramco is evaluating bids for the three tenders and is expected to award contracts within the first quarter.

    ALSO READ: Aramco to finalise long-term agreements with engineering firms
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15582695/main5945.jpeg
    Indrajit Sen
  • Etihad Rail awards multibillion-dollar high-speed rail contracts

    5 February 2026

     

    Register for MEED’s 14-day trial access 

    The UAE’s Etihad Rail has awarded multibillion-dollar design-and-build contracts for the civil works and station packages of the high-speed railway (HSR) line connecting Abu Dhabi and Dubai.

    The contract for the construction of the Abu Dhabi side of the railway was awarded to a consortium comprising Abu Dhabi's National Projects Construction (NPC), Trojan Tunnelling, Turkiye's Kalyon and Beijing-headquartered China State Construction Engineering Corporation.

    The other deal, comprising the construction of the Dubai side of the railway, was awarded to a consortium of India's Larsen & Toubro, Beijing-based China Harbour Engineering Company and local firm Wade Adams.

    MEED understands that the whole scheme is worth $8bn-plus.

    US-based Jacobs is the designer for the NPC group.

    French engineering firm Egis and Singapore’s Surbana Jurong are the designers for the L&T-led consortium.

    Last month, MEED exclusively reported that Etihad Rail was preparing to award the contracts for the HSR.

    The design speed of trains running on the UAE’s HSR network will be 350 kilometres an hour (km/h), and the operating speed will be 320km/h.

    The proposed HSR programme will be constructed in four phases, gradually adding further connectivity to other areas within the UAE.

    The first phase involves constructing a railway line connecting Abu Dhabi and Dubai, which is expected to be operational by 2030.

    The second phase will develop an inner‑city railway network with 10 stations within the city of Abu Dhabi.

    The third phase of the railway network involves constructing a connection between Abu Dhabi and Al-Ain.

    The fourth phase involves developing an inter-emirate connection between Dubai and Sharjah.

    The 150km first phase of the HSR will stretch from the Al-Zahiyah area of Abu Dhabi to Al-Jaddaf in Dubai.

    The project’s civil works have been split into two packages – Abu Dhabi and Dubai – comprising four sections. The scope of these sections includes:

    • Phase 1A: Al-Zahiyah to Yas Island (23.5km) 
    • Phase 1B: Yas Island to the border of Abu Dhabi/Dubai (64.2km)
    • Phase 1C: Abu Dhabi/Dubai border to Al-Jaddaf (52.1km)
    • Phase 1D: Abu Dhabi airport delta junction and connection with Abu Dhabi airport station (9.2km)

    The rail line will have five stations: Al-Zahiyah (ADT), Saadiyat Island (ADS), Yas Island (YAS), Abu Dhabi International airport (AUH) and Al-Jaddaf (DJD).

    The ADT, AUH and DJD stations will be underground, while ADS will be elevated and YAS will be at grade.

    The overall construction package also includes provisions for rolling stock, railway systems and two maintenance depots.

    The high-speed project will slash journey times between the UAE’s two largest cities and economic centres. The journey time between the YAS and DJD stations will be 30 minutes.

    Spanish engineering firms Sener and Ineco are the project’s engineering consultants.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15578874/main.jpg
    Yasir Iqbal
  • Aldar announces $18bn UAE contract awards in 2025

    4 February 2026

    Abu Dhabi-based real estate developer Aldar Properties has announced the award of construction contracts totalling over AED66bn ($18bn) in 2025.

    These awards span a diverse portfolio of residential, commercial, infrastructure and logistics projects across the UAE. 

    The newly awarded contracts cover large-scale residential communities, strategic infrastructure, and Grade A commercial and logistics assets across key growth locations nationwide.

    Collectively, the projects will deliver thousands of new homes, modern commercial and logistics facilities, and critical infrastructure that respond to evolving market demand and advance sustainable urban development.

    In Abu Dhabi, contracts were awarded across a range of projects for Aldar and the local government. On Saadiyat Island, local contractor Fibrex Construction was appointed for Mamsha Gardens and Nobu Residences, while Dubai-based Dutco Construction Company was awarded the main contract for The Arthouse.

    On Fahid Island, Indian firm Shapoorji Pallonji was awarded the main contract for Fahid Beach Residences.

    Beijing-headquartered China State Construction Engineering Corporation and Abu Dhabi’s Western Bainoona Group, Nael & Bin Harmal Hydroexpert, Yas Projects, Said Bin Darwish and Noor Al-Sahara General Contracting were also awarded contracts across a number of national housing and infrastructure projects during 2025.

    In Dubai, Aldar continued to deliver across major residential and logistics developments. Sharjah-based Ginco General Contracting was contracted to develop villas and townhouses at Athlon.

    Turkish firm Nurol was awarded the main works package for Verdes by Haven.

    Kuwait’s Mohammed Abdulmohsin Al-Kharafi & Sons was awarded the villas package for The Wilds, and local firm Al-Nasr Contracting Company was awarded the infrastructure works.

    In the industrial and logistics segment, Dubai-based Group Amana was awarded the development of Aldar Logistics Centres at National Industries Park.

    In Ras Al-Khaimah, Shapoorji Pallonji was awarded contracts for the Al-Marjan Beachfront development.

    Aldar said in a statement: “In line with the UAE’s National In-Country Value (ICV) programme, almost 45% of the total value of projects awarded in 2025 is expected to be recirculated into the local economy, supporting economic diversification, industrial development and job creation across the UAE.

    “Aldar continues to embed ICV principles across its procurement processes by prioritising UAE-based contractors and suppliers and supporting the growth of domestic capabilities across the construction value chain,” the statement added.

    READ THE FEBRUARY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Spending on oil and gas production surges; Doha’s efforts support extraordinary growth in 2026; Water sector regains momentum in 2025.

    Distributed to senior decision-makers in the region and around the world, the February 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15568462/main.jpg
    Yasir Iqbal
  • Kuwait signs 25-year offtake for Al-Zour North IWPP

    4 February 2026

    Kuwait has signed a 25-year energy conversion and water purchase agreement for the Al-Zour North independent water and power plant (IWPP) phases two and three.

    The deal was signed by Saudi Arabia’s Acwa and local financial institution Gulf Investment Corporation (GIC) with Kuwait’s Ministry of Electricity & Water, confirming the long-term offtake arrangements for the project.

    The signing marks a key step towards financial close on the estimated $4bn project. Once completed, the facility will add 2,700MW of power and 120 million imperial gallons a day of desalinated water to Kuwait’s supply network.

    Kuwait recently established a new public shareholding company to manage the next stages of the project.

    The Gulf Alliance for Power & Water Company will be responsible for the construction, implementation, management, operation and maintenance of Al-Zour North IWPP phases two and three.

    In August, Acwa, formerly Acwa Power, and GIC signed a contract to develop the project, which will be the country’s largest IWPP. The consortium will hold 40% of the project company through Al-Zour Kuwaiti Second & Third Holding Company.

    The Public-Private Partnership Authority will hold 10% on behalf of government entities, while 50% will be offered to Kuwaiti citizens through a public subscription process.

    The project is owned by the Kuwait Authority for Partnership Projects and the Ministry of Electricity, Water & Renewable Energy.

    The scheme will be developed under a build-operate-transfer model. The newly signed offtake agreement secures revenue for a 25-year period.

    China’s Sepco3 is the engineering, procurement and construction contractor for the project.

    READ THE FEBRUARY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Spending on oil and gas production surges; Doha’s efforts support extraordinary growth in 2026; Water sector regains momentum in 2025.

    Distributed to senior decision-makers in the region and around the world, the February 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15565047/main1611.jpg
    Mark Dowdall
  • Qatar’s Ashghal outlines Q1 2026 project plans

    4 February 2026

    Qatar’s Public Works Authority (Ashghal) has outlined plans to undertake 67 projects as part of its development strategy for 2026. 

    The majority of the upcoming projects cover sectors such as buildings, highways, roads, water and drainage.

    The projects to be undertaken in the first quarter of this year include:

    1. Access road to the Qatari Emiri Air Defence command building
    2. Call-off agreement for road and infrastructure works
    3. Carrying out all recommended work to ensure the necessary approvals from the Civil Defence Authority are obtained
    4. Remaining works of C/2020/60 RIW for junctions & RA in various areas of Greater Doha: phase 9
    5. Remaining works of C/2020/124 R & I in Mebaireek (Zone 81): packages 1&2
    6. Strategic FTS for Karwa City, Asian City, IA 2 Diversions and SA
    7. Modifications and additions to existing schools: packages 2-8
    8. Construction of Mekeines – Umm Bab Link Road
    9. Construction of Msheireb offices
    10. Construction of parking lots for areas 2 and 3 and modification of road infrastructure, the bus station and Gate 6
    11. Remaining works of C/2018/114 Umm Al-Dome improvement
    12. Remaining works of C/2019/90 access roads for Umm Ghuwailina 
    13. Remaining works of C2017/86, roads surrounding Al-Bayt Stadium 
    14. Remaining works of C2018/7 & C2017/118, Al-Kheesa foul sewer: packages 1&2
    15. Consultancy services for MM building damages investigation and repairs recommendations
    16. Consultancy services for modernisation of tunnels on Lusail Expressway & Sabah Al-Ahmad corridor
    17. Consultancy services for survey works, GIS, CAD and BIM on a call-off basis
    18. Consultancy supervision services for construction of Mekeines – Umm Bab Link Road
    19. Demolition and construction of two schools (Simaisma Junior School, Simaisma High School): package 3
    20. Demolition of decommissioned facilities: phase 6
    21. Design and build for water treatment plant (including treated sewage effluent plant for UDST)
    22. Design and construction of pedestrian crossings: phase 4
    23. Design of external administrative buildings for the protection and nature reserves sector, and the Turtle Protection Centre
    24. Design and build of a truck stop outside the wall of the medical quarry in Al-Ruwais
    25. Design, supply and install the new sparkling lights for the Arch 5/6
    26. Execution of Central Doha and Corniche Package: two remaining works
    27. Foul sewer GAP tunnel 1.6 kilometres long, diameter 600-800 mm at Doha North
    28. Framework contract for the road link works in several locations across Qatar 
    29. Industrial area STW asset improvement works: phase 2 AM24-0032
    30. Modernisation of tunnels on Lusail Expressway & Sabah Al-Ahmad corridor
    31. New consultancy supervision services
    32. On-call contract for geotechnical, environmental & structural tests and evaluation services
    33. Operational insurance – property all risk and third-party liability
    34. Package 1: design and build of strategic SGW drainage Western Tunnels – Southern area – C878/S1
    35. Paving and house connection for existing plot at Nuaija Zone 44
    36. Pilot deep wells construction
    37. PPP pre-contract framework – future work orders
    38. Pre-contract PCS for centralised sewage solids treatment and management facility
    39. Pre-contract PCS for Strategic Qatar Integrated Drainage Master Plan Update 2026 C767/3
    40. PSA for Strategic FTS for Karwa City, Asian City, IA 2 Diversions and SA
    41. PSA roads and infrastructure in Wadi Al-Banat (Zone-70)
    42. PSA roads and infrastructure in Al-Kheesa North and East (Rawdat Al-Hamama District): package 3
    43. R&I in southwest of Al-Wukair (DW086 – DW092)
    44. Refurbishment, reinstatement and repair works for strategic location in Qatar: phase 9 (QN) AM22-1011
    45. Roads and infrastructure in Al-Kheesa
    46. Roads and infrastructure in Al-Kheesa North and East (Rawdat Al-Hamama District): package 3
    47. Roads and infrastructure in Rawdat Abal Heeran: package 4
    48. Roads and infrastructure in Sailiya Al-Attiyah: package 1
    49. Roads and infrastructure in Sailiya Al-Attiyah: package 2
    50. Roads and infrastructure north of Smeisma: package 4
    51. Secondment contract for professional staff for the Highway Projects Department
    52. Secondment contract for professional staff for Roads Project department: phase 2
    53. STW rehabilitation and maintenance: Qatar West phase 2 AM25-0020
    54. Supervision for community college projects
    55. Supervision for design and construction of pedestrian crossings: phase 4
    56. Supervision for roads and infrastructure for Qatar Armed Forces
    57. Supervision for roads and infrastructure for Qatar Armed Forces – A
    58. Supervision for the design and build of a new communications room and technical store for Al-Shahaniya radio station
    59. Supervision for foul sewer GAP tunnel – 1.6km long, diameter 600-800 mm – at Doha North
    60. Supervision of deep injection wells enabling works – pilot at Al-Thumama
    61. Supervision of the Ministry of Education and Higher Education warehouses project
    62. Supply of equipment and spares for DNOM AM21-192
    63. Supply of pumps for DNO&M workshop section AM25-0075
    64. Surrounding roads around North Camp
    65. Surrounding roads around Doha Air Base
    66. TSE rehabilitation and maintenance: Qatar West phase 2 – AM25-0031
    67. TSE renewal programme and assets improvements: Qatar South phase 2 – AM22-132
    Qatar market overview

    Qatar’s next construction cycle is starting to take shape. In recent months, the country has made progress on several high-profile, large-scale infrastructure schemes that are set to inject fresh momentum into Qatar’s construction pipeline and, crucially, translate into years of contract flow for local contractors, suppliers and service firms.

    The largest of these schemes includes the proposed high-speed rail line connecting Riyadh and Doha, the revived Friendship Bridge to Bahrain and a planned road corridor linking Qatar with the UAE.

    For the construction industry, these moves signal that the state is ready to shift from post-World Cup consolidation to a new, longer-term buildout anchored in regional connectivity.

    That longer-term view is especially important after a flat 2025, when contract awards slipped to just over $2bn — the weakest annual total in the past five years — and many in the industry felt a widening gap between plans and procurement.

    The mood has now shifted. With about $64bn-worth of projects in the pipeline, Qatar is not short of project opportunities.

    The next phase has the potential to sustain contractors and the wider supply chain in the near term, while bringing a more predictable rhythm back to the market as these programmes are broken into packages and move to tender.

    MEED’s February 2026 report on Qatar includes:

    > COMMENT: Qatar’s strategy falls into place
    > GVT & ECONOMY: Qatar enters 2026 with heady expectations
    > BANKING: Qatar banks search for growth
    > OIL & GAS: QatarEnergy achieves strategic oil and gas goals in 2025
    > POWER & WATER: Dukhan solar award drives Qatar's utility sector
    > CONSTRUCTION: Infrastructure investments underpin Qatar construction

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15565036/main.jpeg
    Yasir Iqbal