According to a research, Saudi banks are using leaner cost structures, growing fee franchises, and plenty of capital to navigate a traditional late-cycle pivot, which is characterized by strong loan demand and clean books offsetting narrower margins.
The Kingdom’s biggest lenders maintained strong profitability in the third quarter despite a changing rate environment and growing funding costs, according to the most recent KSA Banking Pulse by Alvarez & Marsal (A&M). This highlights the industry’s capacity to modify its balance sheets, extract efficiencies, and safeguard earnings in a late-cycle environment.
Even as sector dynamics started to change due to monetary easing, the top 10 listed banks produced another steady quarter. Strong non-interest income growth and strict cost control across most institutions contributed to the 2.8% quarterly increase in aggregate net income.
With gross loans and advances increasing 2.5% due to a 3.0% increase in corporate lending and a 1.7% increase in retail lending due to increased credit card activity, credit demand remained robust. However, as the industry continued to see a shift from low-cost CASA to higher-yielding time deposits, deposits grew at a slower rate of 2.2%, dropping from 2.7% in the prior quarter.
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