Alvarez & Marsal says Saudi banks' prospects 'positive' in light of Vision 2030

Asad Ahmed, General Manager and Head of Financial Services in the Middle East at Alvarez & Marsal, said that the banking sector in Saudi Arabia will likely contribute mainly to achieving the goals of Vision 2030, indicating that Saudi banks enjoy positive prospects.

Ahmed also said, in the report on the performance of the banking sector in Saudi Arabia for 2023, that this comes in line with the surge in the growth of potential loans and the high quality of assets supported by strong capital.

He added that, according to the scenario of lowering interest rates expected by the second half of 2024, net interest margins are expected to remain stable at about 3% this year.

Moreover, the report confirms the great potential for growth and stability in the banking sector, which recorded a remarkable growth in operating income and an increase in return on shareholders’ equity.

The banking sector continued its progress, leveraging the favorable credit conditions, despite the presence of some challenges in the economic landscape, said Ahmed, pointing out that the analyzes reflect the permanent stability and promising upward trend of this sector, which spurs optimism for a prosperous future.

According to the report, Saudi banks are expected to maintain their current level in the future, with the potential for further growth.

The year 2023 witnessed liquidity being exposed to several relative pressures as loan growth rates exceeded that of deposits, amid rising interest rates, the research firm added.

It also indicated that deposits of government agencies reached a record level of 31.2% of the total bank deposits in Saudi Arabia, compared to about 28.4% in 2022, and also represented 68.2% of the total increase in deposits in 2023, which led to an increase in the injection of money supply into the economy, and thus, alleviating the issues of liquidity in the Saudi banking system.

According to data available to Argaam, the aggregate profit of Saudi banks rose by about 12% to reach SAR 69.96 billion in 2023, from SAR 62.52 billion in 2022.

Source: Argaam .