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Deposits, Loans Raise Saudi Banks’ Profits in 3rd Quarter

Saudi banks register high profitability in the third quarter of 2023. (SPA)
Saudi banks register high profitability in the third quarter of 2023. (SPA)
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Deposits, Loans Raise Saudi Banks’ Profits in 3rd Quarter

Saudi banks register high profitability in the third quarter of 2023. (SPA)
Saudi banks register high profitability in the third quarter of 2023. (SPA)

Saudi banks achieved SAR 18 billion ($4.8 billion) in profits at the end of the third quarter of 2023 - the highest quarterly profits in their history - due to the rise in interest rates and the increase in the volume of deposits and the diversification of the products they offer to their customers.

The profitability of Saudi banks increased by SAR 1.5 billion over the same quarter in 2022, maintaining profit growth for the third quarter in a row, according to the financial results announced on the Saudi Stock Exchange (Tadawul).

The net profits of the 10 banks listed on the Saudi stock market during the third quarter of 2023 amounted to about SAR 18.08 billion, compared to SAR 16.61 billion the same quarter in 2022.

In remarks to Asharq Al-Awsat, Dr. Mohammed Makni, General Manager of Ithmar Development Company and Assistant Professor of Finance and Investment at Imam Mohammad bin Saud University in Saudi Arabia, said the banking sector was a key component in the Saudi national economy and a partner in achieving the Saudi Vision 2030 programs.

Makni pointed to the high confidence in Saudi banks, adding that the growth in the volume of deposits has helped banks increase their profitability over the past three quarters, which positively impacts the growth of the Saudi economy’s domestic product, and confirms the good planning of Saudi banks in choosing qualitative investments.

Total deposits in Saudi banks exceeded SAR 2.5 trillion, the highest in the Kingdom’s history, while loans amounted to about SAR 2.4-2.5 trillion.

Financial markets analyst Abdullah Al-Kathiri told Asharq Al-Awsat that the rise in banks’ profitability was due to the growth in the size of deposits, which allowed the banks to increase the loans granted to individuals and establishments.

He added that banks were able to maintain lending operations and increase profit margins, especially with the continuing rise in interest rates, noting that the economic expansion and diversification that Saudi Arabia is witnessing in conjunction with the implementation of Vision 2030 has improved the volume of companies’ demand for loans during the past quarters.

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Inflation Rose to 2.3% in Europe. That Won't Stop the Central Bank from Cutting Interest Rates

A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq
A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq
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Inflation Rose to 2.3% in Europe. That Won't Stop the Central Bank from Cutting Interest Rates

A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq
A view shows the Bercy Economy and Finance Ministry as a metro operated by the Paris transport network RATP passes over the Pont de Bercy bridge in Paris, France, November 28, 2024. REUTERS/Stephanie Lecocq

Inflation in the 20 countries that use the euro currency rose in November — but that likely won’t stop the European Central Bank from cutting interest rates as the prospect of new US tariffs from the incoming Trump administration adds to the gloom over weak growth.
The European Union’s harmonized index of consumer prices stood up 2.3% in the year to November, up from 2.0% in October, the EU statistics agency Eurostat reported Friday.
Energy prices fell 1.9% from a year ago, but that was offset by price increases of 3.9% in the services sector, a broad category including haircuts, medical treatment, hotels and restaurants, and sports and entertainment, The Associated Press reported.
Inflation has come down a long way from the peak of 10.6% in October 2022 as the ECB quickly raised rates to cool off price rises. It then started cutting them in June as worries about growth came into sharper focus.
High central bank benchmark rates combat inflation by influencing borrowing costs throughout the economy. Higher rates make buying things on credit — whether a car, a house or a new factory — more expensive and thus reduce demand for goods and take pressure off prices. However, higher rates can also dampen growth.
Growth worries got new emphasis after surveys of purchasing managers compiled by S&P Global showed the eurozone economy was contracting in October. On top of that come concerns about how US trade policy under incoming President Donald Trump, including possible new tariffs, or import taxes on imported goods, might affect Europe’s export-dependent economy. Trump takes office Jan. 20.
The eurozone’s economic output is expected to grow 0.8% for all of this year and 1.3% next year, according to the European Commission’s most recent forecast.
All that has meant the discussion about the Dec. 12 ECB meeting has focused not on whether the Frankfurt-based bank’s rate council will cut rates, but by how much. Market discussion has included the possibility of a larger than usual half-point cut in the benchmark rate, currently 3.25%.
Inflation in Germany, the eurozone’s largest economy, held steady at 2.4%. That “will strengthen opposition against a 50 basis point cut,” said Carsten Brzeski, global chief of macro at ING bank, using financial jargon for a half-percentage-point cut.
The ECB sets interest rate policy for the European Union member countries that have joined the euro currency.