According to the latest research publication issued by Credit Suisse entitled “Saudi Arabia Banks”, the six largest listed banks in the Kingdom are some of the most profitable entities within the EEMEA region. In addition, they exhibit some of the strongest fundamentals in the EEMEA region, based on liquidity, funding structure, capitalization, asset quality, capital formation, and earning growth.
According to the report, Saudi banks’ strong performance comes despite complying with one of the toughest regulatory frameworks in the world.
On one side, banks generate high levels of liquidity through demand deposits, accounting for more than 50% of total deposits along with a strong focus on the retail segment. On the other side, the landscape remains somewhat competitive between these large banks as they retain most of the market share. This has not contributed to margin pressure due to minimal loan growth. However, new entrants, strong economic growth and a flatter interest rate have resulted in accelerating credit supply.
Looking at banks in the GCC, including those of Saudi Arabia, they feature relatively high capitalization levels. However, Saudi banks exhibit comparatively better asset quality metrics. Indeed, their NPL ratio is among the lowest, while their NPL coverage ratio is well above 100%.
Mena Weekly Monitor