meed-logo

line1 line2 line3
SIGN IN / REGISTER

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

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

Click here to register
Exclusive from Meed
Related Articles
  • Adnoc plans new offshore-to-onshore oil transport pipeline

    20 August 2026

     

    Abu Dhabi National Oil Company is moving ahead with an ambitious plan to build an oil pipeline network that will transport oil from its main offshore oil processing islands in the Gulf to its onshore crude export terminal in Jebel Dhanna, Abu Dhabi.

    The planned pipeline network will source crude from Zirku Island and Das Island, where Adnoc gathers and treats oil produced at Abu Dhabi’s offshore fields, among other processing hubs, and transport those volumes across 300 kilometres inland to the Jebel Dhanna terminal.

    According to sources, the proposed pipelines will eventually connect to the West-East crude pipeline network currently being built from Abu Dhabi’s Jebel Dhanna to the emirate of Fujairah, and is expected to be commissioned in 2027.

    The Abu Dhabi energy giant has awarded a contract for concept studies and front-end engineering and design (feed) to Abu Dhabi-based NT Energies, a joint venture of Abu Dhabi-based contractor NMDC Energy and France’s Technip Energies, sources told MEED.

    NT Energies is expected to carry out the concept studies and feed on a “fast-track basis”, with the work anticipated to take seven months, sources said.

    A kick-off meeting between the client and the appointed consultant took place on 6 July, sources added.

    Additionally, Adnoc has appointed Australia-headquartered Worley to provide project management consultancy (PMC) services, sources further said.

    West-East oil pipeline

    In May, Adnoc said it was accelerating work on the West-East crude transport pipeline project from Jebel Dhanna to Fujairah, upon directions from its board.

    The West-East pipeline project involves constructing a cross-country pipeline to transport crude from Adnoc’s export terminal at Jebel Dhanna to the Fujairah terminal, covering a distance of about 520km.

    The pipeline will double Adnoc’s crude export capacity through Fujairah on the Indian Ocean coast and enable shipments to bypass the geopolitically volatile Strait of Hormuz.

    Crude will be sourced from Adnoc’s offshore processing centres at Das, Zakum and Umm Lulu islands before being stored at new storage facilities to be built at the Jebel Dhanna terminal.

    The pipeline will be segmented into three sections:

    • Jebel Dhanna to Habshan main pumping station (MPS) – 115km
    • Habshan MPS to Sweihan depot – 254km
    • Sweihan depot to Fujairah terminal – 153km

    Adnoc awarded Egyptian contractor Engineering for Petroleum & Process Industries (Enppi) an engineering, procurement and construction management (EPCm) contract for the project in February 2024.

    Adnoc’s total spend on EPCm works could be as high as $3bn, MEED previously reported.

    Sources have told MEED that Adnoc has, in turn, appointed state-owned China Petroleum Pipeline (CPP) and locally based Bin Asheer to carry out construction works on the three segments of the West-East pipeline network.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18887774/main0639.jpg
    Indrajit Sen
  • Contractors confirm Al-Maktoum airport people-mover award

    20 August 2026

    Register for MEED’s 14-day trial access 

    A team of Japan’s Mitsubishi Corporation and Indian contractor Larsen & Toubro (L&T) has confirmed that it has won a design-and-build contract for the automated people-mover (APM) system for phase one of Al-Maktoum International airport in Dubai.

    In a statement released earlier today, L&T classified the contract as large, a term the company uses to denote an order value of $261m-$523m.

    MEED exclusively reported in July that Dubai Aviation Engineering Projects (DAEP) had selected a contractor to deliver the APM system as part of the first phase of the $35bn expansion of the airport.

    The APM system will serve as a critical facility for operations at Al-Maktoum International. The system will run under the apron of the entire airfield and the airport’s terminals. It will consist of several tracks, taking passengers from the terminals to the concourses.

    Four underground stations will be built as part of the first phase. The overall plan includes 14 stations at the airport.

    The firms submitted the bids for the project in July last year, as MEED exclusively reported.

    The contract is the latest in a series of awards signed by DAEP recently. It has awarded contracts valued at about AED13bn ($3.5bn), with construction works currently under way on several airport packages.

    These include enabling works, the second runway and the initial structural foundations for passenger terminals and gates.

    Upcoming awards

    In June, DAEP said that it will award contracts worth over AED55bn ($15bn) by the end of this year for construction works at Al-Maktoum International airport.

    The projects slated for contract awards include the substructure works for the western passenger terminal, the fourth aircraft concourse building and the baggage handling system, in addition to the superstructure works for the western passenger terminal and the first, second and third aircraft concourses.

    The packages also encompass long-span structural frameworks for buildings covering about 1.5 million square metres (sq m), infrastructure works for the southern airfield area and power generation and district cooling plants supporting the construction programme.

    The award of the facade and roofing packages is also planned for this year.

    Construction progress

    In May last year, MEED exclusively reported that DAEP had awarded a AED1bn ($272m) deal to UAE firm Binladin Contracting Group to construct the second runway at the airport.

    The enabling works on the terminal were awarded to Abu Dhabi-based Tristar E&C.

    Construction on the project’s first phase is expected to be completed by 2032.

    Construction of substructure works began in November last year, when DAEP formally selected a contractor to deliver the package.

    The government approved the updated designs and timelines for its largest construction project in April 2024.

    In a statement, the authorities said the plan is for all operations from Dubai International airport to be transferred to Al-Maktoum International within 10 years.

    According to an official description on DAEP’s website, the expanded airport’s West Terminal will be a seven-level, 800,000 sq m facility with an annual capacity of 45 million passengers.

    It will be the second of three terminals at the airport.

    In September 2024, MEED exclusively reported that a team comprising Austria’s Coop Himmelb(l)au and Lebanon’s Dar Al-Handasah had been confirmed as the lead masterplanning and design consultant on the expansion of Al-Maktoum.

    The airport’s construction is planned to be undertaken in three phases. It will cover an area of 70 square kilometres south of Dubai and will have five parallel runways and 430 aircraft gates.

    It will be five times the size of the existing Dubai International airport and will have the world’s largest passenger-handling capacity of 260 million passengers a year. For cargo, it will have the capacity to handle 12 million tonnes a year.

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

    Saudi Arabia builds for the global stage; Rising uncertainty creates fresh set of challenges in the Maghreb; Gulf banks remain robust in the face of geopolitical tensions.

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

    > MARKET FOCUS: Maghreb fortunes diverge
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/18884056/main.png
    Yasir Iqbal
  • Saudi Arabia awards estimated $1bn phosphate rail deal

    20 August 2026

     

    Register for MEED’s 14-day trial access 

    Saudi Arabian Railways (SAR) has awarded an estimated SR4bn-plus ($1.1bn) contract to add another track to the first section of the existing phosphate transport railway network in the kingdom’s Eastern Province.

    The contract was awarded to local firm Alomaier Trading & Contracting Company.

    The scope includes track doubling, alignment modifications, utility bridges, culvert widening and hydrological structures, as well as the conversion of the AZ1 siding into a mainline track.

    The scope also covers support for signalling and telecommunications systems.

    The existing railway line runs from the Waad Al-Shamal mines to Ras Al-Khair. The new project will cover about 100 kilometres (km), connecting the AZ1/Nariyah Yard to Ras Al-Khair.

    Switzerland-based engineering firm ARX is the project consultant.

    The project is the first of four packages for the phosphate railway line that SAR is expected to award imminently.

    In 2023, MEED reported that SAR was planning two projects to increase its freight capacity, including an estimated SR4.2bn ($1.1bn) project to install a second track on the North Train freight line and construct three new freight yards.

    Formerly known as the North-South Railway, the North Train is a 1,550km-long freight line running from the phosphate and bauxite mines in the far north of the kingdom to the Al-Baithah junction. There, it diverges into a line southward to Riyadh and a second line running east to downstream fertiliser production and alumina refining facilities at Ras Al-Khair on the Gulf coast.

    Adding a second track and the freight yards will significantly increase cargo-carrying capacity on the network and facilitate growth in industrial production. Project implementation is expected to take four years.

    State-owned SAR is also considering increasing the localisation of railway-focused materials and equipment, including the construction of a cement sleeper manufacturing facility.

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

    Saudi Arabia builds for the global stage; Rising uncertainty creates fresh set of challenges in the Maghreb; Gulf banks remain robust in the face of geopolitical tensions.

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

    > MARKET FOCUS: Maghreb fortunes diverge
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/18876428/main.jpg
    Yasir Iqbal
  • Libya and Tunisia reschedule joint oil and gas licensing round

    19 August 2026

    The Libyan-Tunisian Joint Oil Exploration, Exploitation & Petroleum Services Company (Joint Oil) has rescheduled its planned licensing round for offshore exploration and development projects in a zone spanning the waters of both countries.

    The bidding process is now due to open on 7 September 2026, with bid submissions due by 8 January 2027.

    Previously, in May, Joint Oil said it planned to open the bid round on 1 August 2026.

    The upcoming round will offer two oil and gas packages. The first is an exploration package across the 3,000-square-kilometre Joint Oil Block, in water depths of 80-120 metres.

    Significant data is available on the geology of this area, including 6,500km of 2D and 1,900 square kilometres of 3D seismic data. Data also exists from a run of legacy wells dating to 1976.

    The second package covers development of the Zarat discovery specifically. This is a gas-condensate reservoir straddling the boundary between Tunisia’s national acreage and the jointly-held Joint Oil Block.

    Joint Oil is equally owned by Tunisia’s national oil company, ETAP, and OLA Energy Holdings, a subsidiary of the Libya Africa Investment Portfolio (LAIP).

    LAIP is a subsidiary of Libya’s sovereign wealth institution, the Libya Investment Authority.

    Joint Oil was established under a bilateral agreement between Libya and Tunisia in 1988 to explore and develop hydrocarbons in offshore areas shared by the two countries.

    The key dates from the new schedule for the licensing round are:

    • 7 September 2026: Bid round opens; qualified offshore operators can apply for access to the Virtual Data Room
    • 9 September 2026: Joint Oil presents the opportunity at the MMEA Scout Group meeting in London
    • 29-30 September 2026: Joint Oil presents at the World Energy Summit in London
    • 31 December 2026: Bid round closes
    • 8 January 2027: Bid submissions due
    • 26 February 2027: Winning bidders notified
    • 30 April 2027: Formal awards expected

    Texas-based Moyes & Co is acting as a strategic adviser on the licensing round.

    Houston-headquartered Marathon discovered the Zarat field in 1992. It is estimated to hold around 0.4 trillion cubic feet of recoverable gas and 50 million barrels of liquids.

    A previous development project concept centred on a mobile production unit, worth around $1bn, tied back to the nearby Miskar platform.

    Despite this, the field has remained undeveloped for over three decades.

    One of the key challenges to developing the reserve is its high carbon dioxide content.

    Joint Oil has run bid rounds for the acreage before without success, including as recently as late 2023.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18861047/main0914.jpg
    Wil Crisp
  • UAE cuts trade and financial links with Iran

    19 August 2026

    Register for MEED’s 14-day trial access 

    The UAE has halted all trade, commercial exchanges and financial transactions with Iran until further notice, the Ministry of Foreign Affairs said on 19 August.

    The suspension has been imposed in light of escalations that undermine regional and international peace and security, the ministry said. It did not specify a timeframe for any resumption.

    The ministry rejected allegations regarding the status of the economic relationship between the UAE and Iran, and restated the UAE's commitment to dialogue, cooperation and regional integration as means of advancing peace, stability and prosperity in the region.

    It said the UAE remains committed to safeguarding the integrity of the financial system, in line with international law and global standards.

    The suspension covers the full range of commercial and financial links between the two countries. The UAE has historically been one of Iran's most significant trading partners, with much of the relationship built on re-export trade routed through Dubai to Iranian ports across the Gulf.

    The ministry statement did not detail the mechanism for enforcing the halt, the sectors affected, or arrangements for existing contracts and in-transit cargo.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18857953/main0856.jpg
    Colin Foreman