Saudi Banks: Strong 2025 Projections
- March 12, 2024 — In a positive outlook, Saudi banks have recently revealed their expectations for a robust financial performance in 2025, driven by increasing loan portfolios and...
- In a series of investor presentations, Saudi banks have disclosed their expectations for continued positive financial results in 2025, with forecasted growth supported by strengthening loan portfolios and...
- All listed banks that have published their forecasts expect a positive growth in their lending portfolios, fueled by strong demand from both corporate and individual sectors.
Saudi Banks Optimistic for 2025: Strong Growth Expected Amid Rising Demand
Table of Contents
March 12, 2024 — In a positive outlook, Saudi banks have recently revealed their expectations for a robust financial performance in 2025, driven by increasing loan portfolios and stable operating costs. This perspective aligns with a broader economic upswing in the region, presenting both opportunities and challenges for the financial sector.
In a series of investor presentations, Saudi banks have disclosed their expectations for continued positive financial results in 2025, with forecasted growth supported by strengthening loan portfolios and stable or improving private commission margins. The cost of risk——measured as the proportion of loan loss provisions to total loans—is anticipated to remain at the same levels as in 2024, or even lower, due to the quality of lending portfolios and an encouraging economic environment.
All listed banks that have published their forecasts expect a positive growth in their lending portfolios, fueled by strong demand from both corporate and individual sectors. The Investment Bank leads the list, expecting a growth rate of more than 15% in its lending portfolio, followed by others like the Rajhi
Bank, and Al-Jazeera Bank, expecting growth of 10% to 12%.
| Saudi Banks’ Lending Portfolios for 2025 (Percentage Change from 2024) | |
| Bank | Growth in Lending Portfolio |
| Al -Rajhi | 8 – 10% |
| BTSF | 10 – 12% |
| Development | 13 – 17% |
| Al Jazeera | 10 – 15% |
| Arab | 13 – 17% |
| Al -Ahly | 10 – 12% |
| The First | 13 – 17% |
| Riyadh | 10 – 12 % |
Three of the Saudi banks—Al -Rajhi
, Al – Arab
, and Al – Jazeera
—expect an increase in their net interest margins for 2025, while the rest anticipate either stability or a slight decrease. This mirrors the overall lessening of interest rate hikes by central banks around the world, including the Federal Reserve, in response to slowing economic growth in each respective country’s economy. Such stability in interest rates could significantly impact the financial outlook for Saudi banks.
| Net Interest Margin Expectations (2025) | ||
| Bank | 2024 Net Interest Margin | 2025 Forecast |
| Al -Rajhi | 3.13% | Increase between 5-15 basis points from previous year |
| BTSF | 3.05% | Increase between 0-10 basis points from previous year |
| Development | 3.70% | Stabilized between 3.65% and 3.75% |
| Al Jazeera | 1.99% | Increase between 5-10 basis points from previous year |
| Arab | 3.79% | Stable between 3.75% and 3.85% |
| Al -Ahly | not published | Net interest income grows between 5% and 10% |
| the First Bank | 2.85% | A slight decrease between 2.70% and 2.80% |
| Riyadh Bank | not published | Net interest income growth as much as 5% |
| Investment Bank | 2.68% | Decrease Between 2.45% to 2.55% |
The cost of credit risk, defined as the ratio of loan loss provisions to total loans, is expected to remain stable or improve from 2024 levels, thanks to high-quality lending portfolios and a favorable economic environment. Banks have attributed this improvement to the robustness of their lending portfolios and the positive economic conditions in the region. It is hoped that continued strong demand and economic growth will further drive these positive results.
| Credit Risk Costs (2025 Expectations) | ||
| Bank | 2024 Credit Cost | 2025 Forecast |
| Al -Rajhi | 0.32% | Stable between 0.30% and 0.40% |
| BTSF | 0.58% | Stable between 0.50% and 0.60% |
| Development Bank | 0.55% | Improved of 0.40% and 0.50% |
| Al Jazeera | 0.32% | Decrease between 0.35% and 0.40% |
| Arab Bank | 0.32% | Decrease of between 0.40% and 0.50% |
| Al -Ahly | 0.16% | Stable between 0.10% and 0.20% |
| The First Bank | 0.23% | Slightly dropped between 0.25% to 0.35% |
| Riyadh Bank | 0.53% | Improved Between 0.30% and 0.40% |
The Saudi banks also anticipate a decrease in their cost-to-income ratios, leading with Saudi
forecasting a decline of over two basis points. This expected decline is driven by a rise in net interest income, which is anticipated to outpace the increase in operational costs. The banks credit this forecast to improvements in operational efficiency and cost management resulting in a favorable bottom line.French
Bank
| Cost to-income Expectations for 2025 | ||
| Bank | 2024 Cost to Income Ratio | 2025 Forecast |
| Al -Rajhi | 24.9% | Dropped to less than 24.5% |
| BTSF Bank | 35.3% | Less than 33.0% |
| Development | 30.9% | Less than 30.0% |
| Al Jazeera | 56.0% | Less than 55.0% |
| Arab Bank | 33.0% | Less than 32.0% |
| Al -Ahly | 28.3% | Less than 28.0% |
| The First Bank | 30.6% | Less than 30.5% |
| Riyadh | 30.6% | Less than 30.5% |
| Investment Bank | 41.5% | Lower than 41.5% |
In 2024, Saudi Arabia’s listed banks realized a net profit of 79.6 billion riyals, an impressive increase of 13.8% from 2023. This growth was largely driven by the expanded lending portfolios and stable levels of loan loss provisions. With continued economic reform and strong government support, the outlook for Saudi banks in 2025 remains optimistic. Investors and industry analysts are keenly monitoring these developments, expecting a sustained period of growth similar to what the U.S. saw post-2008 financial crisis, with high returns, but also potential volatility as interest rates fluctuate.
Saudi Banks: Optimistic Outlook for 2025
Introduction
Saudi banks are anticipating strong financial performance in 2025, driven by increasing loan portfolios and stable operating costs. This optimistic outlook aligns with a broader economic upswing in the region. Here, we explore key insights and address frequently asked questions regarding the expected growth and challenges in the Saudi banking sector.
Key Insights
- Growth in Lending Portfolios: Saudi banks predict significant growth in lending portfolios for 2025, fueled by strong demand from both corporate and individual sectors.
- Net Interest Margins: Some banks expect an increase in net interest margins,while others anticipate stability or slight decreases.
- Cost of Credit Risk: The cost of credit risk is expected to remain stable or improve, thanks to high-quality lending portfolios and a favorable economic environment.
- cost-to-Income Ratios: A decrease in cost-to-income ratios is expected, driven by rising net interest income and improved operational efficiency.
Frequently Asked questions
What Factors Are Driving Growth in Saudi Banks for 2025?
Key Factors:
- Strengthening Loan Portfolios: Banks forecast continued positive financial results supported by strengthening loan portfolios.
- Stable Operating Costs: Operating costs are expected to remain stable or improve, contributing to a robust financial outlook.
- Encouraging Economic Environment: A favorable economic environment supports high-quality lending and low credit risk.
Which Banks Are Expecting the Highest Growth in Lending Portfolios?
Leading Growth Expectations:
- Investment Bank: Anticipates a growth rate of more then 15% in its lending portfolio.
- Growth Bank and The First Bank: Expect growth rates of 13% to 17%.
How Will Net Interest Margins Affect bank Performance in 2025?
Net Interest Margin Projections:
- Increase: Al-Rajhi, BTSF, and Al Jazeera banks expect an increase in net interest margins.
- Stability or Slight Decrease: Other banks,including The First Bank and the Investment Bank,anticipate stability or a slight decrease due to global interest rate trends.
What Are the Expectations for Credit Risk Costs?
Credit Risk Cost Trends:
- Stable or Improved: The cost of credit risk is expected to remain stable or improve, reflecting the strong quality of lending portfolios.
- Specific Forecasts: Al-Rajhi and al Jazeera anticipate stability, while the development Bank and Riyadh Bank expect improvements.
How Will Cost-to-Income Ratios Change in 2025?
Projected Changes:
- Decrease: Saudi French Bank forecasts a decline of over two basis points, driven by increased net interest income and operational efficiency.
- General Trend: Most banks expect a decline in their cost-to-income ratios, contributing to a favorable bottom line.
Conclusion
The outlook for Saudi banks in 2025 is optimistic, with strong growth expected in lending portfolios and stable or improved financial metrics. This growth is supported by a favorable economic environment and strategic management of operating costs and credit risks. As the sector continues to evolve,investors and industry analysts will closely monitor these developments,drawing comparisons with past trends in other global markets,such as the U.S.banking sector post-2008 financial crisis.
For more detailed insights and analysis, consider exploring reputable sources and expert opinions on the global financial landscape.