Alvarez & Marsal: Saudi Arabian banks report Q2 2026 growth and improved efficiency

Consulting firm Alvarez & Marsal released its Q2 2026 banking sector analysis for Saudi Arabia, reporting a period of expansion for the Kingdom’s ten largest listed banks. Aggregate net loans and advances rose by 1.8% quarter-on-quarter, while deposits grew at a stronger rate of 2.7%. Operating income reached 42.5 billion Saudi riyals, a 5.1% increase, supported largely by a 38.5% rise in other operating income.

Operational efficiency measures showed progress, as the cost-to-income ratio fell to 28.6% from 30.1% in the previous quarter. This improvement occurred alongside sustained capital investment in technology and infrastructure. Profitability also trended upward, with return on equity climbing to 15.0% and return on assets reaching 2.1%.

Asset quality metrics provided a mixed outlook for the sector. The non-performing loan ratio remained steady at 0.9%, but the cost of risk rose to 0.32%, signaling a rise in credit provisioning. Sam Gidoomal, Managing Director and Head of Middle East Financial Services at Alvarez & Marsal, described the sector as resilient, though he noted that performance divergence between larger and smaller institutions remains a critical factor.

The outlook for the remainder of 2026 centers on margin sustainability as benchmark interest rates evolve. Banks will also face pressure to maintain credit quality amid regional geopolitical uncertainty and revisions to GDP growth forecasts.