Saudi Banks Show Moderated Growth, Improved Profitability in FY 2025

Management consulting firm Alvarez & Marsal (A&M) has released its analysis of the financial performance of Saudi Arabia's ten largest listed banks for fiscal year 2025. The report highlights the resilience and rebalancing within the Saudi banking sector, noting a moderation in credit growth compared to previous periods. Despite this, banks managed to enhance their profitability, strengthen balance sheets, and improve asset quality, supported by a favorable macroeconomic environment and the momentum from the nation's Vision 2030 initiative.

In FY 2025, lending growth slowed to 11.8% year-over-year, while deposit growth stood at 8.8%. Banks reported a significant increase in net income of 16.3%, driven by an 11.3% rise in operating income. Net interest income grew by 8.5%, and non-interest income saw a robust increase of 21.1%, indicating diversification of revenue streams. Operating efficiency also improved, with the cost-to-income ratio falling to 29.0%.

The prevailing environment of monetary easing put pressure on net interest margins (NIM), which declined to 2.86%. However, overall profitability improved, with return on equity (ROE) rising to 15.2% and return on assets (ROA) reaching 2.1%. Credit risk management remained strong, with the non-performing loan (NPL) ratio decreasing to 0.9%. The coverage ratio for potential loan losses improved to 162.4%.

Sam Gidoomal, Managing Director and Head of Middle East Financial Services at A&M, commented on the report's findings, stating that FY 2025 demonstrated the Saudi banking sector's strength. He cautioned, however, about potential future uncertainties arising from geopolitical risks. Gidoomal believes that banks with disciplined balance sheet management, diversified revenue sources, and exposure to Vision 2030 projects are best positioned for sustained growth.