Fitch Ratings predicted that higher oil prices and interest rates will enhance the profitability of Saudi banks during 2022-2023.
This comes at a time when the loan-to-deposit ratio of Saudi banks is at its highest level in 15 years.
Fitch said that a 200bp increase in interest rates would boost Fitch-rated Saudi banks’ operating profit by 14%.
Fitch also expected that the costs of financing Saudi banks will decline after SAMA pumped 50 billion riyals into the banking system last June.
In other news, Saudi Arabia’s finance companies have demonstrated outstanding performance as their total assets reached SR67 billion ($17.85 billion) in 2021, a 26 % increase from 2020, according to a report by the Saudi Central Bank, also known as SAMA.
Aggregate capital surged 37% to SR19.6 billion in 2021 from SR14.3 billion in 2020.
Net profits also skyrocketed by 114% in 2021, achieving SR1.9 billion, the report stated.
The credit portfolio stood at SR68.1 billion at the end of 2021, a 26 % rise from its value in 2020.
New financing provided during 2021 amounted to SR25.4 billion, a 47 % increase from 2020.
Shareholder’s equity increased 30% to SR25.5 billion in 2021 compared to SR19.6 billion in 2020, the report added.
Looking at net profits breakdown by type of finance company, the non-real-estate ones have recorded SR1.4 billion while real estate finance companies received a net profit of SR0.4 billion in 2021.
Moreover, the share of non-real-estate finance companies in the total credit portfolio was 62% versus 38% for real estate finance ones.
The breakdown of credit portfolio by customer segment is 75% for retail customers, 22% for micro, small and medium enterprises, and 3% for corporates.
In the case of credit portfolios as per primary sectors, residential real estate made up 32%, followed by auto-finance loans at 27% and personal credit at 21%.
Evaluating the credit portfolio breakdown by economic activity, the top three sectors with the highest shares were trade at 21%, construction at 20%, services at 14%, and transportation and telecommunications at 9%.
