Coverage: weekly note · Information to 10 June 2024
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TGB Weekly Research Note · 10 June 2024
First-quarter disclosures from ten Saudi banks put their combined assets at about SAR 3.84 trillion, or roughly $1.02 trillion, at 31 March 2024, with corporate, SME and mortgage financing doing most of the work.
The desk view
The first-quarter disclosures of ten Saudi banks add up to total assets of about SAR 3,843 billion at 31 March 2024, roughly $1.02 trillion at SAMA's official rate of 3.75 riyals to the dollar. The Saudi National Bank (SNB) and Al Rajhi Bank hold 49.6% of that total. The banks' own accounts point to corporate and project lending as the engine, and several tie it explicitly to Vision 2030. The constraint is funding: SNB's and BSF's margins were lower than a year earlier, and BSF's headline loan-to-deposit ratio reached 106.1%, against 84.0% on SAMA's regulatory measure. Our reading is that growth for the rest of the year will depend less on credit demand than on how cheaply banks can fund it.
Two banks hold half of the combined balance sheet
On the banks' own figures, combined total assets at 31 March 2024 were about SAR 3,843 billion, or roughly $1.02 trillion at SAMA's official rate of 3.75 riyals to the dollar. This is an aggregate of bank disclosures rather than an official system total, and it uses SAB's rounded SAR 369 billion.
SNB reported SAR 1,072.1 billion, up 3% in the quarter on financing and investment growth, and Al Rajhi Bank SAR 836 billion, up 7.8% year on year. Together they account for 49.6% of the total. Riyad Bank followed at SAR 404.9 billion, up 6.4%, largely on loan growth of 12.3%. Growth was faster among several mid-sized banks: Alinma Bank's assets rose 14.6% and Bank AlJazira's 13.7%. SAB is left out of the chart because the dated SAB documents used here give no year-earlier asset figure.
Total assets growth, year to 31 March 2024, %
Source: Alinma Bank, Earnings Presentation 1Q 2024, 9 May 2024; Bank AlJazira, 1Q 2024 Preliminary Earnings Release, 2 May 2024; The Saudi Investment Bank, Interim condensed consolidated financial statements, March 31, 2024, 7 May 2024; Banque Saudi Fransi, 1Q 2024 Earnings Release, 6 May 2024; The Saudi National Bank, 1Q 2024 Preliminary Earnings Release, 29 April 2024; Arab National Bank, Earnings Presentation 1Q 2024, 31 May 2024; Al Rajhi Bank, 1Q 2024 Earnings Release, 29 April 2024; Riyad Bank, 1Q 2024 Preliminary Earnings Release, 28 April 2024; Bank Albilad, Interim condensed consolidated financial statements, March 31, 2024, 29 April 2024.
Lending did the work, and the banks link it to Vision 2030
At SNB, wholesale financing rose 6% in the quarter to SAR 277 billion, corporate financing 4% to SAR 244 billion and mortgages 4% to SAR 168 billion. Al Rajhi Bank's corporate financing grew 19.1% and SME financing 24.3% year on year, while mortgages grew 6.2% and total retail financing was flat. Its chairman said this growth contributes to the goals of Vision 2030.
SAB said its loans grew 6% in the quarter against 4% for the market, with corporate originations spanning NEOM-related construction, real estate, energy and aviation rather than giga projects alone. Its mortgage book reached SAR 31 billion, and it said it supports Real Estate Development Fund programmes in conjunction with Vision 2030 home ownership targets. BSF's loans rose 13% year on year to SAR 185.4 billion, and its management said it was optimistic about further acceleration of Vision 2030 projects. SAIB's loans grew 5% in the quarter to SAR 84.6 billion, mainly in corporate business, and its management expects Vision 2030 initiatives and mega projects to be the biggest driver. The common thread is that growth sits in corporate, SME and project-linked books, which ties the sector's balance sheet more closely to project spending than to household demand.
Ten Saudi banks at 31 March 2024
| Bank | Total assets (SAR bn) | Financing or loans (SAR bn) |
|---|---|---|
| SNB | 1,072.1 | 625.2 |
| Al Rajhi Bank | 836 | 609 |
| Riyad Bank | 404.9 | 282.9 |
| SAB | 369 | 229 |
| BSF | 268.4 | 185.4 |
| Alinma Bank | 244.9 | 180.7 |
| anb | 232.1 | 157.9 |
| Bank Albilad | 143.7 | 103.3 |
| SAIB | 136.4 | 84.6 |
| Bank AlJazira | 135.8 | 84.1 |
Source: The Saudi National Bank, 1Q 2024 Preliminary Earnings Release, 29 April 2024; Al Rajhi Bank, 1Q 2024 Earnings Release, 29 April 2024; Riyad Bank, 1Q 2024 Preliminary Earnings Release, 28 April 2024; Saudi Awwal Bank, 1Q24 Earnings call transcript, 13 May 2024; Saudi Awwal Bank, 1Q24 results press release, 5 May 2024; Banque Saudi Fransi, 1Q 2024 Earnings Release, 6 May 2024; Alinma Bank, Earnings Presentation 1Q 2024, 9 May 2024; Arab National Bank, Earnings Presentation 1Q 2024, 31 May 2024; Bank Albilad, Interim condensed consolidated financial statements, March 31, 2024, 29 April 2024; The Saudi Investment Bank, Interim condensed consolidated financial statements, March 31, 2024, 7 May 2024; The Saudi Investment Bank, 1Q 2024 Earnings Call Transcript, 13 May 2024; Bank AlJazira, 1Q 2024 Preliminary Earnings Release, 2 May 2024.
Funding is the binding constraint
BSF's headline loan-to-deposit ratio reached 106.1%, up from 98.4% a year earlier, although its ratio on SAMA's regulatory basis was a lower 84.0%. By contrast, SNB's customer deposits rose 11% in the quarter, and Al Rajhi Bank's loan-to-deposit ratio fell to 78.7% from 87.8%. SNB also raised USD 850 million under its sustainable financing sukuk programme. Banks with strong deposit franchises therefore have more room to keep lending than those leaning on market funding.
The cost of funding shows in margins. SNB's net special commission margin fell 27bp year on year to 3.08% as funding costs rose faster than yields, and BSF's net interest margin narrowed 47bp to 3.19%. SAMA raised its repo rate by 25bp to 6.00% in July 2023. BSF's outlook assumed stable rates in the first half of 2024 and potential cuts of up to 50bp towards the end of the year.
A non-oil economy that keeps credit demand alive
GASTAT estimated that real GDP fell 1.7% year on year in the first quarter of 2024 as oil activities declined 11.2%, while non-oil activities grew 3.4%. In our view, bank credit tracks non-oil activity more closely than oil output, which helps explain how a contracting headline economy coexisted with strong asset growth at most of the ten banks. Profitability has so far absorbed the margin pressure: SNB earned SAR 5,040 million in the quarter and Al Rajhi Bank SAR 4,405 million, while Alinma Bank's net income rose 36%. The question for the rest of 2024 is whether deposits and wholesale funding can keep up with project-driven loan demand without further eroding margins.
Primary sources: The Saudi National Bank, 1Q 2024 Preliminary Earnings Release, 29 April 2024; Al Rajhi Bank, 1Q 2024 Earnings Release, 29 April 2024; Riyad Bank, 1Q 2024 Preliminary Earnings Release, 28 April 2024; Saudi Awwal Bank, 1Q24 Earnings call transcript, 13 May 2024; Banque Saudi Fransi, 1Q 2024 Earnings Release, 6 May 2024; Alinma Bank, Earnings Presentation 1Q 2024, 9 May 2024; Arab National Bank, Earnings Presentation 1Q 2024, 31 May 2024; Bank Albilad, Interim condensed consolidated financial statements, March 31, 2024, 29 April 2024; Bank AlJazira, 1Q 2024 Preliminary Earnings Release, 2 May 2024; The Saudi Investment Bank, Interim condensed consolidated financial statements, March 31, 2024, 7 May 2024; Saudi Central Bank, SAMA Affirms Commitment to Exchange Rate Policy, 4 May 2020; The Saudi National Bank, Q1 2024 Earnings Call transcript, 14 May 2024; The Saudi Investment Bank, 1Q 2024 Earnings Call Transcript, 13 May 2024; General Authority for Statistics, Non-oil activities grow by 3.4% in Q1, 2024, 9 June 2024; Saudi Awwal Bank, 1Q24 results press release, 5 May 2024; Saudi Central Bank, Decision on Repo and Reverse Repo Rates, 26 July 2023.