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Saudi Banks Profit from Rising Lending, Deposit Volumes

One of the traders monitors the performance of stocks in the financial market (AFP)
One of the traders monitors the performance of stocks in the financial market (AFP)
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Saudi Banks Profit from Rising Lending, Deposit Volumes

One of the traders monitors the performance of stocks in the financial market (AFP)
One of the traders monitors the performance of stocks in the financial market (AFP)

Financial analysts connect the 8.2% increase in net profits for Saudi banks in the first quarter of 2024 to strong lending, higher demand for loans, and increased deposits.

They point out that rising interest rates in recent years have boosted bank profits, especially from long-term loans with fluctuating interest rates.

By the end of the first quarter of 2024, the top 10 Saudi banks listed on the Saudi stock market (Tadawul) saw their combined net profits rise by 8.2 percent, reaching about 18.65 billion Saudi riyals ($5 billion).

This marks an increase of approximately 1.41 billion Saudi riyals ($376 million) compared to the same period in 2023, when net profits totaled 17.24 billion Saudi riyals ($4.6 billion).

In their financial reports on the Saudi stock market, Al Ahli Bank, also known as the Saudi National Bank (SNB), grabbed about 27% of total bank profits.

Their profits saw a slight uptick of 0.36%, reaching SAR5.04 billion compared to SAR5.022 billion in the same quarter last year, with an increase of SAR 18 million.

Al-Rajhi Bank came in second, marking its highest quarterly profits since its inception at SAR4.41 billion, a 6.27% increase from the previous year’s SAR4.15 billion in the first quarter.

Riyad Bank secured third place with profits of SAR2.07 billion in the first quarter of 2024, up by 2.63% from the same period in 2023.

Moreover, Bank Aljazira recorded the most significant growth rate in the quarter, soaring over 47%, with profits hitting SAR300 million compared to last year’s SAR204 million in the same period.

Discussing the rise in net profits of Saudi banks, financial analyst Abdullah Al-Kathiri credited it to their early expansion in lending and financing during years of low interest rates.

Speaking to Asharq Al-Awsat, Al-Kathiri highlighted the banks’ focus on long-term loans and mortgages tied to variable rates, which brought in high profits.

He also noted a recent surge in deposits across all banks, leading to increased lending. Al-Kathiri mentioned that many banks have exceeded the regulatory limit of 90% of deposits, some even reaching 105%.

To manage this, some banks increased their capital and issued bonds.

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ECB's Lagarde Renews Integration Call as Trade War Looms

FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
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ECB's Lagarde Renews Integration Call as Trade War Looms

FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo

European Central Bank President Christine Lagarde renewed her call for economic integration across Europe on Friday, arguing that intensifying global trade tensions and a growing technology gap with the United States create fresh urgency for action.
US President-elect Donald Trump has promised to impose tariffs on most if not all imports and said Europe would pay a heavy price for having run a large trade surplus with the US for decades.
"The geopolitical environment has also become less favorable, with growing threats to free trade from all corners of the world," Lagarde said in a speech, without directly referring to Trump.
"The urgency to integrate our capital markets has risen."
While Europe has made some progress, EU members tend to water down most proposals to protect vested national interests to the detriment of the bloc as a whole, Reuters quoted Lagarde as saying.
But this is taking hundreds of billions if not trillions of euros out of the economy as households are holding 11.5 trillion euros in cash and deposits, and much of this is not making its way to the firms that need the funding.
"If EU households were to align their deposit-to-financial assets ratio with that of US households, a stock of up to 8 trillion euros could be redirected into long-term, market-based investments – or a flow of around 350 billion euros annually," Lagarde said.
When the cash actually enters the capital market, it often stays within national borders or leaves for the US in hope of better returns, Lagarde added.
Europe therefore needs to reduce the cost of investing in capital markets and must make the regulatory regime easier for cash to flow to places where it is needed the most.
A solution might be to create an EU-wide regulatory regime on top of the 27 national rules and certain issuers could then opt into this framework.
"To bypass the cumbersome process of regulatory harmonization, we could envisage a 28th regime for issuers of securities," Lagarde said. "They would benefit from a unified corporate and securities law, facilitating cross-border placement, holding and settlement."
Still, that would not solve the problem that few innovative companies set up shop in Europe, partly due to the lack of funding. So Europe must make it easier for investment to flow into venture capital and for banks to fund startups, she said.