S&P expects strong performance of Saudi banks to continue

The Kingdom of Saudi Arabia's flag

S&P Global Ratings in a recent report said it expects Saudi banks to continue with their strong performance, noting that the sector has shown solid performance so far, generally in line with expectations.

The rating agency considers the Saudi banking sector to be the best in the GCC region, as it appears to be the least vulnerable in the current environment.

Saudi banks' performance was broadly in line with the agency’s expectations with two notable deviations. First, credit to the domestic private sector increased faster-than-expected because of quicker mortgage growth.

Second, system-wide average cost of risk was better than expected, including one-offs related to the National Commercial Bank-Samba Financial Group merger. However, it also demonstrates stronger non-oil sector performance, the report added.

S&P expects credit growth to reach about 15% in 2021, highly skewed toward retail and mortgage lending.

Saudi banks will continue to benefit from the implementation of Vision 2030, which will boost asset quality and profitability indicators.

The cost of risk is seen to remain stable at about 90 bps-100 bps from 100 bps at 2020 end, to reflect stronger banking sector performance.