Saudi banking sector takes resilient strides towards ’26

Saudi banks are navigating a classic late-cycle pivot — solid credit demand and clean books offsetting thinner margins — and they are doing so with leaner cost structures, rising fee franchises, and ample capital, a report showed.

- Somshankar Bandyopadhyay [e-mail]

According to the latest KSA Banking Pulse by Alvarez & Marsal (A&M), despite a shifting rate environment and rising funding costs, the Kingdom’s largest lenders continued to post solid profitability in the third quarter, underscoring the sector’s ability to adjust its balance sheets, extract efficiencies and protect earnings in a late-cycle environment.

The top ten listed banks delivered another stable quarter, even as monetary easing began to reshape sector dynamics. Aggregate net income rose 2.8 per cent quarter-on-quarter, supported by strong non-interest income growth and firm cost discipline across most institutions.

Credit demand remained healthy, with gross loans and advances rising 2.5 per cent, driven by 3.0 per cent growth in corporate lending and a pickup in retail lending to 1.7 per cent, aided by stronger credit card activity. Deposits, however, expanded at a slower 2.2 per cent, moderating from 2.7 per cent in the previous quarter as the sector continued to witness a shift from low-cost CASA to higher-yielding time deposits. This shift pushed the loan-to-deposit ratio to 106.2 per cent, an indication of tightening liquidity conditions that banks will likely need to manage more actively moving into 2026.