Coverage: Q2 2026 · Information to 25 September 2026
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Published: 25 September 2026 | Region: Middle East & North Africa | Country: Saudi Arabia | Coverage: Q2 2026 (April–June 2026) | Classification: Premium Intelligence
Desk view — Saudi Arabia, Q2 2026
- An oil shock, not a banking shock. Real GDP fell 4.7% year on year in Q2 2026 as oil activities dropped by about a quarter during the disruption to Gulf shipping; non-oil activities still grew 0.9%.
- Balance sheets kept expanding. Bank credit rose 7.3% to SAR 3.42 trillion and deposits 8.9% to SAR 3.13 trillion at end-June 2026.
- Profits grew, but more slowly. Commercial banks earned SAR 53.95 billion before zakat and tax in H1 2026, up 5.8%. Al Rajhi Bank (+14.2%) and SNB (+7.2%) led the largest lenders.
- Funding is getting dearer. Time and savings deposits jumped 25.1% while demand deposits fell 3.2%, and banks’ foreign liabilities rose 24.8%.
- Buffers are intact: NPL ratio 1.06% and capital adequacy 20.89% at end-Q1 2026. SAMA held the repo rate at 4.25% through Q2 and raised it to 4.50% on 16 September 2026, following the Federal Reserve.
Executive summary
The second quarter of 2026 was a severe test for the Saudi economy, but much less so for its banks. The war in the Middle East and the closure of the Strait of Hormuz, which forced Gulf producers to shut in crude output from March, cut oil activity sharply. The General Authority for Statistics (GASTAT) estimates that real GDP fell 4.7% year on year in Q2, after growth of 3.0% in Q1, as oil activities contracted sharply. Non-oil activities, the base of most bank lending, still grew 0.9%, as did government activities. Inflation stayed contained at 1.8% in June.
The banking system absorbed the shock. Saudi Central Bank (SAMA) data show commercial-bank assets of SAR 5.16 trillion at end-June 2026, up 7.1% on a year earlier. Bank credit grew 7.3% and deposits 8.9%, so deposit growth outpaced lending over the year. Banks earned SAR 53.95 billion before zakat and tax in the first half, 5.8% more than a year earlier. The five largest banks all reported higher first-half profits, from 3.5% growth at Riyad Bank to 14.2% at Al Rajhi Bank.
The pressure shows up in the details. Customers moved money from current accounts into time deposits, raising funding costs. Mortgage origination slowed, Al Rajhi Bank and SNB cut their financing-growth guidance, and Al Rajhi raised its cost-of-risk guidance. Capital and asset quality remain strong, with an NPL ratio of 1.06% and a capital adequacy ratio of 20.89% at the end of Q1 2026. With the US Federal Reserve now raising rates and SAMA following on 16 September, the second half will test how far higher funding costs and weaker oil income weigh on the sector’s growth.