Saudi Banks Show Strong Lending Momentum in Q3 2025

Saudi Arabia’s top banks continued to display steady growth in the third quarter of 2025, with net loans and advances rising 2.5 percent from the previous three months, according to a new analysis. The increase highlights ongoing lending activity across the Kingdom’s financial sector, driven primarily by corporate loans.

“Saudi Arabia’s 10 largest listed banks recorded a 2.5 percent increase in net loans and advances in the third quarter from the previous three months, underscoring sustained lending momentum in the Kingdom, a new analysis showed. The growth was driven by corporate lending, which rose 3 percent during the period and accounted for roughly 59 percent of total loans, according to Alvarez & Marsal’s latest KSA Banking Pulse report,” the report said.

The report from Alvarez & Marsal notes that retail lending also saw moderate growth, climbing 1.7 percent quarter on quarter. Deposit growth, however, eased to 2.2 percent, down from 2.7 percent in the second quarter. The slowdown was mainly attributed to the Saudi National Bank, which reported a 2.9 percent decline in deposits, reflecting a 7.9 percent contraction in time deposits. Deposits from government-related entities fell slightly, representing 31.2 percent of total deposits in Q3.

Operating income across Saudi banks rose 1.8 percent during the quarter, slightly below the 2 percent increase recorded in Q2. Net interest income remained largely unchanged, rising just 0.1 percent, while fee and commission income advanced 3.8 percent. Aggregate net income grew 2.8 percent compared with 3.4 percent in the previous quarter.

Sam Gidoomal, managing director and head of Middle East Financial Services at Alvarez & Marsal, said, “Saudi banks continued to demonstrate operational resilience during the third quarter of 2025, supported by stable lending activity, disciplined cost management, and improving asset quality.”

The sector’s financial position remained solid despite pressure on net interest margins, which contracted by 7 basis points to 2.73 percent due to rising funding costs. Banks improved cost efficiency for the third consecutive quarter, cutting operating expenses by 0.9 percent and lowering the cost-to-income ratio to 28.7 percent. Return on equity edged up to 15.5 percent, while return on assets stayed at 2.1 percent. Asset quality strengthened, with the non-performing loan ratio falling to 0.94 percent and coverage ratios rising to 158.1 percent.

Quentin Mulet-Marquis, managing director for Financial Services at Alvarez & Marsal, said, “Strong earnings, low NPL rates, and comfortable capital buffers underpin investor confidence, while healthy valuation multiples and competitive dynamics continue to support growing appetite for mergers and acquisitions activity in the sector.”

The report analyzed Saudi National Bank, Al Rajhi Bank, Riyad Bank, Saudi British Bank, Banque Saudi Fransi, Arab National Bank, Alinma Bank, Bank Albilad, Saudi Investment Bank, and Bank Aljazira. Earlier this month, S&P Global highlighted that the Kingdom’s private credit market is expected to grow rapidly, supporting funding needs linked to its Vision 2030 transformation agenda.