The biggest banks in Saudi Arabia recorded higher profits for the first quarter as the Gulf nation continues its economic rebound from the COVID-19 pandemic.
Saudi National Bank, the kingdom's largest lender by assets, posted a 32% year-over-year jump in first-quarter net profit to 4.50 billion riyals, driven in part by higher net special commission income and fees from banking services.
Al Rajhi Banking & Investment Corp. booked a 24% growth in net profit to 4.13 billion riyals, also boosted by higher banking services fees and net financing and investment income. Riyad Bank and Banque Saudi Fransi, meanwhile, reported net profit increases of nearly 15% and more than 12%, respectively.
Saudi Arabia's GDP growth and fiscal trajectory will continue improving on the back of ongoing structural reforms and better oil sector dynamics, S&P Global Ratings said in an April 25 report.
However, the country's oil-dependent economy remains relatively undiversified and highly sensitive to commodity prices, and is also subject to potential economic spillover effects of geopolitical risks, the rating agency noted.
As for Saudi Arabia's financial sector, Ratings said the asset quality of its banks, which improved over the course of 2021, is set to stabilize owing to write-offs and rapid lending expansion in the last two years.
Credit growth is projected to remain robust and further expand by between 10% and 12% this year and through 2023, buoyed by mortgages and corporate lending as the government accelerates its Vision 2030 projects. Meanwhile, credit losses are poised to hover around the pre-pandemic level on expected new nonperforming loans inflows following the lifting of forbearance measures in March, Ratings noted.
Banks are also slated to benefit from interest rate hikes by the U.S. Federal Reserve, which are typically mirrored by the Saudi Central Bank due to the riyal's peg to the U.S. dollar. Ratings calculates that for every 100-basis-point increase in rates, banks' net income will likely increase by 13% and return on equity an additional 1.5 percentage points, based on data from the country's 10 listed banks.
Other banks across the Gulf Cooperation Council have also reported higher profits. In the United Arab Emirates, First Abu Dhabi Bank PJSC logged a 106.8% surge in first-quarter attributable net profit to 5.12 billion dirhams from a year ago, as it booked a net gain of 2.8 billion dirhams from the sale of a majority stake in its payments business Magnati. Meanwhile, Dubai Islamic Bank PJSC's attributable net profit rose 57.3% on a yearly basis to 1.33 billion dirhams for the quarter, mainly driven by a 44% drop in impairment losses.
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* Jordan-based Arab Bank Group's net income reached $166 million in the first quarter, up 29.4% from the year-ago $128.3 million, backed by an increase in core banking income and a lower cost of risk.
* Other Middle Eastern banks that published results for the first quarter include Saudi Arabia-based Alinma Bank and Saudi Investment Bank, Qatar's Masraf Al Rayan QPSC and Doha Bank QPSC, and UAE-based Commercial Bank of Dubai PSC and Mashreqbank PSC.
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