S&P expects Saudi banks to report 9% credit growth in 2024

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Saudi banks will likely report strong credit growth of 8%-9% in 2024, however, this is lower than 10% credit growth reported on Dec. 31, 2023, Standard & Poor's (S&P) credit rating agency said in a recent report.

“We expect mortgage lending growth to slow further in 2024 due to high rates and market maturity,” the report noted.

As interest rates increased over the past 18 months, S&P said it expects it to lead to higher non-performing loans (NPLs). However, the impact is likely to be marginal because Saudi corporates have relatively manageable leverage. The asset quality indicators of Saudi banks are stable, it added.

“We expect the Saudi government and its related entities will continue to inject deposits into the banking system to support the banks' credit growth,” S&P said.

The contribution of government and government-related entities' deposits increased to 30% of the total by 2023 from almost 20% in 2020.

Given the sheer size and long-term nature of investments under Vision 2030, S&P believes that the banking sector alone will not be able to meet funding needs, and that substantial part of the financing will come from the local and international capital markets, which will lead to increased exposure of Saudi banks to global liquidity conditions.