Saudi banks lead Gulf in loan growth

Banks in Saudi Arabia recorded the highest spikes in net loans in the second quarter of 2021. Return on equity among banks in the Kingdom also increased as the region’s economy persists on the path to sustained recovery. 

Lender in the Kingdom grew their loan books by a net 13.1 percent from the last quarter. According to Kuwait-headquartered asset manager Kamco, this is the highest rate recorded by any country in the GCC. 

A key scale for measuring the profitability of lenders, return on equity was 11.0 percent for the Saudi Arabian lenders. This puts the kingdom in second place regionally, closely behind Qatar, and well over the average of 9.1 percent.

Total credit facilities disbursed by Saudi Arabian lenders are valued at SR1.95 trillion at the end of June 2021, marking a 4.0% quarter-on-quarter increase and a 16.8% year-on-year.

This growth was driven by the assumption of corporations that interest rates will stay low till the close of 2022 and the resulting rush for project finance.

As one report stated, “an increase in loan loss provisions in the GCC was mainly led by Saudi Arabia, with LLPs almost doubling to $1.2 bn during Q2-2021 from $0.6 bn in Q1-2021.”

The leading factor behind this is an increase in provisions reported by Saudi Arabia after Saudi National Bank’s merger deal with Samba Financial Group.