Saudi Banks Poised for Strong Lending Growth in 2026 Amid Vision 2030 Investments

Banks operating in Saudi Arabia are expected to sustain robust lending growth in 2026, supported by continued demand tied to Vision 2030 projects, according to a report by S&P Global. The rating agency said the Kingdom’s banks could extend $65 billion to $75 billion in new corporate loans next year, slightly below $70 billion in the year ending November 30, 2025.

The growth is expected to be driven primarily by investments in the real estate and utilities sectors, reflecting ongoing economic diversification under the government’s Vision 2030 plan. S&P Global noted that banks are also likely to continue tapping external funding sources to support this expansion.

Retail lending, particularly mortgages, is another area of expected growth. Mortgages account for roughly half of retail lending, which rose five percent in the year to November 30, 2025. S&P Global forecasts this segment could increase to nearly $20 billion in 2026 from $18 billion currently, benefiting from lower interest rates.

The report said Saudi banks’ lending books are expected to grow around 10 percent next year, compared with 11 percent in the past year, while maintaining strong performance. The report highlighted that government and government-related entity deposits, which reached 32 percent of total deposits in November, will continue to support credit growth. However, deposits alone will not be sufficient to fund the expansion, prompting banks to rely on external debt. Net external debt as a proportion of total loans is expected to rise modestly from 6 percent, a level S&P Global considers manageable.

Profitability is projected to remain strong, though slightly pressured by lower interest rates and a higher cost of risk. Return on average assets is expected to dip to around 2.2 percent in 2026. Banks are also projected to continue investing in digitalization to improve efficiency. Capitalization remains healthy, with Tier 1 capital adequacy at 18.4 percent and a risk-adjusted capital ratio of 13.1 percent as of year-end 2024.

Private capital financing is growing in importance, although it still accounts for a small portion of overall debt. S&P Global noted that private capital financing has expanded tenfold since 2020, reaching $3.7 billion in 2024, and could play a larger role in supporting Vision 2030 projects and small-to-medium enterprise growth.

Economic growth prospects in Saudi Arabia remain supportive. Rising household consumption, higher oil output following eased OPEC+ quotas, and continued Public Investment Fund investments exceeding $40 billion annually are expected to fuel demand. The World Bank projects GDP growth of 4.3 percent in 2026, up from 3.8 percent in 2025, while the International Monetary Fund raised its 2026 forecast to 4.5 percent, citing resilient domestic demand and ongoing reforms.

S&P Global maintained stable outlooks for all Saudi bank ratings but noted potential risks from geopolitical turmoil or a prolonged decline in oil prices. Overall, the report indicates that Saudi banks are well-positioned to support the Kingdom’s continued economic expansion and the financing needs of Vision 2030.