Meed | Saudi lenders gear up for corporate growth

Saudi lenders gear up for corporate growth

13 March 2024

MEED's April 2024 special report on Saudi Arabia includes:

> GVT & ECONOMY: Saudi Arabia seeks diversification amid regional tensions
> UPSTREAM: Aramco spending drawdown to jolt oil projects
> DOWNSTREAM: Master Gas System spending stimulates Saudi downstream sector
> POWER: Riyadh to sustain power spending
> WATER: Growth inevitable for the Saudi water sector
> CONSTRUCTION: Saudi gigaprojects propel construction sector
> TRANSPORT: Saudi Arabia’s transport sector offers prospects

As Saudi Arabia’s once rapacious mortgage market slows down, lenders in the kingdom are building up their corporate loan books.

Banks’ exposure to the retail market is steadily reducing as the growth of the mortgage market – the big driver of credit growth in recent years – abates. Saudi lenders reported mortgage lending growth of 8% in the first nine months of 2023, compared to 19% in September 2022.

And where once the split between new business booked by Saudi banks was weighted 60:40 on retail and corporate, the split in 2023 was 50:50.

“We have noticed a decrease in Casa (current account and savings accounts). It used to be almost 70% a couple of years ago, but now it is close to 50%, and it means that the cost of funding is growing too,” says Anton Lopatin, senior director, financial institutions at Fitch Ratings.

Changing landscape

One component of this is the moderation of mortgage financing on the back of tightening subsidies and higher interest rates. “In general, the affordability of mortgage financing is less now and we see banks switching their focus to corporate lending. There’s a bit of reshuffling going on and we think that about 60% of the financing growth in 2024 will be from the corporate sector,” says Lopatin.

While Saudi Arabia's Vison 2030 projects have yet make little impact on local banks’ loan books, the expectation is that this will change, and that major economic diversification initiatives will yield good business for Saudi banks.

In the meantime, these lenders must deal with some near-term challenges in 2024, notably higher liquidity – a contrast to the situation in 2022, when financing growth of 14% outpaced deposit growth at 9%, and higher interest rates intensified competition for funding, according to Fitch Ratings. Data from the Saudi Arabian Monetary Agency (Sama) shows that the kingdom’s money supply surged 10% in January 2024 to reach SR2.72tn ($726bn).

That growth was primarily driven by a significant rise in banks’ term and savings accounts, which recorded a rise of 31% to reach SR864.32bn ($230.4bn). These deposits have attracted savings looking for higher yields.

Government reallocation

Another trend has been that government-related entities (GREs) have made moves to increase deposits in the banking system. According to Fitch, liquidity has been supported by increased deposit inflows from GREs, which grew by SAR147bn ($39.2) or 23% in the 12 months to the end of October 2023. Another ratings agency, S&P, noted that the contribution of government and GRE deposits increased to 30% of the total by 2023 from almost 20% in 2020.

According to Fitch, these inflows are mainly term deposits, which are an expensive source of funding for banks. This increase, plus higher competition for funding, has significantly raised the average cost of funding for Saudi banks; it rose to 2.7% in the first nine months of 2023, compared to just 0.4% in 2021.

“There’s been a change in how the Saudi authorities are managing GRE liquidity,” says Lopatin, who notes that GREs are now choosing to invest their surplus liquidity in higher income-generating deposits with commercial banks, rather than with Sama.

“Since July last year, we’ve seen a significant increase in government-related deposits in the banking sector. And we understand they have adjusted this approach, and now the government entities directly deposit with banks, instead of using the central bank as an additional chain into distribution of liquidity. That is also more efficient.”

Challenging conditions

Banking conditions in Saudi Arabia are looking more challenging in 2024 than in previous years. As Fitch notes, Saudi banks on average saw financing growth slightly above 10% for 2023, and the expectation is that growth will also be about 10% in 2024 – below the expansion of 14% seen in 2022.

Some banks that used to have stronger net margins have reported declines because of the focus on mortgage financing –which is under fixed rates in the kingdom – in conjunction with an increased cost of funding on the back of a declining proportion of Casa accounts. For example, Al Rajhi Banking & Investment Corporation reported that funding costs increased by 74% in year-on-year terms in 2023.

“Al Rajhi’s margins were under pressure last year but are now roughly in line with the sector average of 3.2%,” says Lopatin.

In general, UAE banks reported stronger margins than Saudi banks in 2023, says Lopatin. This is because, in combination with tightening liquidity, Saudi lenders have less ability to manage their margins.

Corporate lending in the kingdom will likely receive a boost from Vision 2030 projects.

“We expect more Vision 2030-related financing to appear on banks’ books this year. It’s still not very material, but most banks want to participate as they see these projects as having a decent balance between risk and reward,” says Lopatin.

Rating agency S&P has said that Saudi banks will need stronger access to international capital to sustain growth and continue financing projects related to Vision 2030. For now, the dependence of Saudi banks on external funding is limited.

Over the long-term, if Saudi banks do build more external debt, that could pose another challenge. International investors now have sustainability at the centre of their investment mandates, and local lenders will also need to look more seriously at their own sustainability metrics.

For example, last year, a panel of UN-appointed human rights specialists was reported to have sent letters to Saudi Aramco and financiers including Citi, Goldman Sachs and BNP Paribas, noting that their financing of the state energy company may be in violation of global human rights rules due to the company’s contribution to climate change. The letter urged the banks to take reasonable steps to prevent or mitigate the impact.

If Saudi banks do become major lenders to Vision 2030 schemes, and therefore need to source funds from outside the kingdom, they too will have to acclimatise to the new global reality – even if that is not a pressing requirement right now.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11587887/main.gif

James Gavin

Exclusive from Meed

Jedco maps next phase of Jeddah airport expansion
22 September 2026
Contractor wins $105m Medina university hospital deal
22 September 2026
Oman tenders Thumrait Industrial City infrastructure
22 September 2026
Kuwait halves drilling contractor pool
22 September 2026
Abu Dhabi expects 45% emissions cut as electricity demand rises
21 September 2026

Jedco maps next phase of Jeddah airport expansion
22 September 2026

Jeddah Airports Company (Jedco) has outlined plans for the next phase of expansion at King Abdulaziz International airport (KAIA) in Jeddah.

The programme comprises six upcoming contractor packages spanning airside works, terminal upgrades and utilities as Jedco advances its long-term expansion plans.

The opportunities include airfield rehabilitation; a five-year construction framework covering multiple workstreams and facility types; a Terminal 3A (T3A) package; Terminal 1 (T1) optimisation; a fuel farm; and Concourse C works.

The packages cover terminal buildings and ancillary facilities, runways, taxiways and aprons, hangars, fuel systems, airside facilities, supporting infrastructure and utility networks.

Tendering and award activity will be staggered over the next two years. Airfield rehabilitation is targeted for Q3 2026. The construction framework is scheduled for Q4 2026 and will run for five years.

The T3A package is planned for Q1 2027 and will be delivered under an early contractor involvement contract. Local contractors are encouraged to bid as part of a joint venture with an experienced international partner.

T1 optimisation is planned for Q4 2027, the fuel farm for Q2 2027, and Concourse C – currently the latest of the six milestones – for Q2 2028.

The new packages add detail to Jedco’s wider expansion plans disclosed in 2023, when it was reported that the company would invest SR115bn ($31bn) to increase KAIA’s capacity to 114 million passengers a year, with an overall completion target of 2031.

Jedco has recently awarded several significant contracts linked to the airport’s upgrade programme.

In November 2024, a joint venture of local Algihaz Contracting and Turkey’s TAV was awarded a contract to rehabilitate the South Terminal to serve Umrah and Hajj pilgrims, with Singapore’s Surbana Jurong acting as consultant.

Earlier that year, Jedco also awarded France’s Alstom a contract to increase the capacity of the Innovia automated people mover at Terminal 1, including new cars and upgrades to signalling, communications and controls.

Surbana Jurong is expected to play a leading role in future KAIA expansion plans and is currently providing technical advisory and project management consultancy for more than 100 capital projects for Jedco, valued at over SR6bn ($1.6bn).

These upgrades are expected to boost KAIA’s annual capacity in line with Saudi Arabia’s Vision 2030 and National Aviation Strategy, enhancing the experience for domestic travellers and millions of Hajj and Umrah pilgrims.

https://image.digitalinsightresearch.in/uploads/NewsArticle/19877992/main.jpg

Yasir Iqbal

Contractor wins $105m Medina university hospital deal

22 September 2026

Riyadh-based construction firm Al-Mansouria General Contracting Company has been awarded a SR396m ($105.6m) contract to complete the remaining construction works on the Taiba University Hospital project in Medina.

The contract scope includes structural completion, remaining civil works, mechanical, electrical and plumbing installations, specialised clinical fit-outs and medical gas infrastructure to bring the long-stalled facility into operation.

Located on King Khalid Road along Medina’s Third Ring Road, the teaching hospital will have a capacity of 563 beds.

The contract duration is three years, with delivery targeted for late 2029.

The latest award follows a prolonged procurement cycle that began more than a decade ago as part of a public budget drive to expand Saudi Arabia’s higher education infrastructure.

The project’s first phase was initially signed in December 2011 with local firm Al-Muhaidib Contracting under a SR500m ($133.3m) contract.

Groundbreaking for the eight-storey complex took place in July 2013. The project covers a gross floor area of more than 200,000 square metres.

Progress stalled shortly thereafter due to reported structural delays and the reallocation of public capital budgets across the kingdom’s social infrastructure pipeline.

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

Nuclear power ambitions gather pace; Kuwait keeps dealmaking alive despite war; Region invests in raising gas processing capacity.

Distributed to senior decision-makers in the region and around the world, the September 2026 edition of MEED Business Review includes:

> AGENDA: Gulf nuclear revival takes shape

> MARKET FOCUS: Kuwait keeps dealmaking alive under fire

> INDUSTRY REPORT: Gas processing takes centre stage in Mena region

> INTERVIEW: Emsteel persists with business productivity and efficiency

> TUNNELS: The Gulf’s next construction boom is happening underground

To see previous issues of MEED Business Review, please click here

https://image.digitalinsightresearch.in/uploads/NewsArticle/19870032/main.jpg

Yasir Iqbal

Oman tenders Thumrait Industrial City infrastructure
22 September 2026

Oman’s Public Establishment for Industrial Estates (Madayn) has tendered an estimated RO15m ($39m) contract to develop infrastructure for Thumrait Industrial City.

The tender was issued on 14 September, with bids due by 12 November.

The scope covers site-wide utilities and services, including an internal road network, stormwater channels and culverts. It also includes installing sewerage and water networks, along with landscaping works.

In addition, Madayn intends to build plug-and-play industrial units and a facilities building.

The first phase of the development will cover about 120,000 square metres (sq m).

Thumrait Industrial City is located in Oman’s Dhofar Governorate and spans an area of more than four million sq m.

The project location is close to concession blocks, quarry sites and the Najd agricultural areas. It is positioned to attract industrial investments in sectors such as mining and minerals processing (including gypsum and cement), food production, and a range of light and general manufacturing activities.

In March, Madayn said it is preparing to invest more than RO245m ($637m) to upgrade and expand infrastructure across its industrial cities between 2026 and 2030, as part of efforts to attract new investment and advance economic diversification.

According to media reports, Madayn chief executive Dawood Bin Salim Al-Hadabi said the programme is part of an expanded, phased plan aligned with Oman Vision 2040 and the authority’s long-term Madayn 2040 strategy.

The objective is to deepen Oman’s industrial base and spread growth across the sultanate’s governorates.

Madayn said the pipeline comprises about 90 strategic projects to improve industrial-city infrastructure, extend serviced land and increase the overall ease of doing business for investors.

https://image.digitalinsightresearch.in/uploads/NewsArticle/19866218/main.jpg

Yasir Iqbal
Kuwait halves drilling contractor pool
22 September 2026
State-owned upstream operator Kuwait Oil Company (KOC) has reduced the number of approved contractors for onshore drilling and shallow-well maintenance from 51 to 24.

Firms that are no longer qualified include major contractors such as Italy’s Saipem, Oklahoma-based Helmerich & Payne and Houston-based Patterson-UTI Energy.

The latest list still includes a wide range of Kuwaiti, regional and international companies, according to the latest update on its electronic system, published on 21 September 2026.

The full list of contractors that are now qualified to participate in tenders is:
- Burgan Company for Well Drilling, Trading & Maintenance (Kuwait)
- Kuwait Drilling Company (Kuwait)
- Sun Drilling Kuwait (Kuwait)
- TDL Kuwait for Oil Rigs & Natural Gas Extraction Activities, Services and Facilities (Kuwait)
- United Precision Drilling (Kuwait)
- Abraj Energy Services (Oman)
- Adnoc Drilling Company (UAE)
- Arabian Drilling Company (Saudi Arabia)
- Anton Oilfield Services (China)
- China Oilfield Services (China)
- Egyptian Drilling Company (Egypt)
- CNPC Bohai Drilling Engineering Company (China)
- Great Wall Drilling Company (China)
- John Energy (India)
- Kerui Oilfield Service (China)
- KCA Deutag Drilling (Germany)
- Mohammed Al-Barwani Petroleum Services (Oman)
- Nabors Drilling International (US)
- National Drilling & Services Company (Oman)
- Sea & Land Drilling Contractors (Oman)
- Sinopec International Petroleum Service Corporation (China)
- Karamay Jianye Energy (China)
- Modern Drilling Company (Egypt)
- Grey Wolf Drilling International (US)
An earlier list, which was published on 11 February, included 51 qualified companies.

The reduction in qualified drilling contractors follows KOC’s notice on 27 April this year, informing existing qualified contractors that they would need to reapply.
https://image.digitalinsightresearch.in/uploads/NewsArticle/19863744/main3435.jpg

Wil Crisp

Abu Dhabi expects 45% emissions cut as electricity demand rises

21 September 2026

Register for MEED’s 14-day trial access

Abu Dhabi-based Emirates Water & Electricity Company (Ewec) expects carbon emissions from power and water production to fall by more than 45% by 2035 as the UAE expands renewable energy and reverse osmosis (RO) desalination.

The state offtaker's latest long-term system planning forecasts emissions will decline from about 42 million tonnes in 2019 to approximately 23 million tonnes in 2035.

The reduction is expected despite annual electricity demand that is forecast to rise by about 70% in 2026-33.

Ewec said the expansion of renewable energy and the shift towards RO desalination will be the principal drivers of the reduction.

The company plans to increase Abu Dhabi's solar capacity to 14GW by 2030 and more than 35GW by 2035. This will be supported by up to 15GW of battery storage capacity.

According to regional project tracker MEED Projects, Ewec has over $16bn-worth of power and water projects in the execution stage as part of its long-term procurement programme to increase renewable energy and low-carbon water production capacity.

This includes a 5.2GW Abu Dhabi solar and battery energy storage system (bess) round-the-clock renewable energy project, as well as three 1.5GW solar photovoltaic independent power projects (IPP): Al-Ajban, Al-Khazna and Al-Zarraf.

It also comprises the 1GW Al-Dhafra open-cycle gas turbine power plant, the 2.5GW Taweelah C combined-cycle gas turbine (CCGT) plant and a separate 400MW bess IPP.

As previously reported, it is expected that the developer's agreement for the 3.3GW Al-Nouf 1 CCGT IPP will be signed by the end of the year, while contractors are preparing to submit bids for a separate 2.6GW power plant project in Ajman.

The expansion of solar and battery storage is expected to reduce the system's reliance on gas-fired generation. However, gas-fired generation will continue to provide flexibility to support the system and balance intermittent renewable power output, according to Ewec.

The offtaker also expects RO desalination to account for more than 95% of total water production by 2035, with the procurement programme supporting the Abu Dhabi Department of Energy's Clean Energy Strategic Target 2035 for electricity production and the UAE Net Zero by 2050 Strategy.