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Three Factors Drive Record Profits for Saudi Banks

The National Commercial Bank (NCB) continued to hold the largest share of the total net profits among banks listed on the Tadawul (AFP)
The National Commercial Bank (NCB) continued to hold the largest share of the total net profits among banks listed on the Tadawul (AFP)
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Three Factors Drive Record Profits for Saudi Banks

The National Commercial Bank (NCB) continued to hold the largest share of the total net profits among banks listed on the Tadawul (AFP)
The National Commercial Bank (NCB) continued to hold the largest share of the total net profits among banks listed on the Tadawul (AFP)

Saudi banks posted their highest-ever quarterly profits in Q2 2024, with net earnings up 13% from the same period last year.

Analysts attribute this boost to three main factors: a rebound in lending and financing, increased deposits, and lower credit provisions. They expect this strong performance to continue in future quarters.

The ten listed Saudi banks reported a 13% rise in net profits, reaching SAR19.54 billion ($5.2 billion) for Q2 2024, up from SAR17.27 billion ($4.6 billion) in Q2 2023.

The National Commercial Bank (NCB) led with the highest share of profits, earning SAR5.23 billion, a 4.3% increase from the previous year. Al-Rajhi Bank came second with SAR4.69 billion, a 13.2% rise year-on-year.

Riyad Bank reported SAR 2.33 billion in profits for Q2 2024, a 17.93% increase from the same quarter last year. Alawwal Bank saw the highest growth rate, with profits up over 30% to SAR 2.02 billion.

Thamer Al-Saeed, Head of Asset Management at Rasana Financial, cited three key reasons for the record profits: The return of active lending, increased deposit volumes, and reduced credit provisions. He believes these trends will continue to boost bank profits in the coming quarters.

Mohamed Hamdy Omar, CEO of G-World, noted that the banking sector is likely to see further profit growth due to rising income from commissions and loans.

He highlighted the positive outlook for the sector, driven by ongoing projects and government initiatives to support business and infrastructure development in Saudi Arabia.

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Turkish Cenbank Inflation Forecasts Unchanged, Vows Tight Policy

Business and residential buildings are seen in Sisli district, in Istanbul, Türkiye, July 26, 2024. REUTERS/Dilara Senkaya
Business and residential buildings are seen in Sisli district, in Istanbul, Türkiye, July 26, 2024. REUTERS/Dilara Senkaya
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Turkish Cenbank Inflation Forecasts Unchanged, Vows Tight Policy

Business and residential buildings are seen in Sisli district, in Istanbul, Türkiye, July 26, 2024. REUTERS/Dilara Senkaya
Business and residential buildings are seen in Sisli district, in Istanbul, Türkiye, July 26, 2024. REUTERS/Dilara Senkaya

The Turkish Central Bank has left its mid-point inflation forecasts for end-2024 and end-2025 unchanged at 38% and 14% respectively, Governor Fatih Karahan said on Thursday, vowing to maintain a tight monetary policy stance.
In a briefing on the bank's latest quarterly inflation report, Karahan said that inflation was projected to fall to 9% by the end of 2026.
"We will decisively maintain our tight monetary policy stance until price stability is achieved," he said. "By maintaining the cautious stance in monetary policy, we envisage that inflation will decline steadily in the rest of the year."
Turkish annual consumer price inflation eased to 61.78% in July, accelerating what is expected to be a sustained slide. Economists see end-year inflation around 42%, Reuters reported.
The bank has raised its policy rate by 4,150 basis points since June last year, but has kept it unchanged at 50% since March to allow the tightening to have an impact.
Karahan said a tight monetary policy stance could be maintained even when the time comes for rate cuts.
"We need to maintain the tight stance for a long time. This does not mean that interest rates will never be cut. A tight stance can be maintained with rate cuts," he said.
The lira was largely flat at 33.5225 to the dollar after his comments, having touched a record low of 33.6700 earlier this week.
EXPECTATIONS CRITICAL
Karahan said the bank's "decisive" monetary policy stance would support the downtrend in monthly underlying inflation amid rebalancing in domestic demand, real appreciation of the lira and the improvement in inflation expectations.
"The convergence of inflation expectations to the forecast range is of critical importance for disinflation," he added.
In its last quarterly report in May, the bank nudged up its year-end inflation forecast to 38% from a previous 36% due to an unexpectedly large rise in the first four months of the year.
The tightening cycle over the last year marked a stark turnaround after years of unorthodox economic policy under President Recep Tayyip Erdogan, who in the past urged low rates despite rising prices.
On July 26, Deputy Governor Cevdet Akcay told Reuters that the bank was not even considering a rate-cutting cycle at this time as easing too early could reignite inflation and extend the pain for an economy on the verge of disinflation.
As it seeks to cool the economy, the bank is also rebuilding foreign reserves which had plunged under previous economic programs that had sought to stabilize the lira.