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Saudi-listed banks' average solvency ratio slightly retreat to 19.4% in Q3 2022
Saudi Arabian banknotes
The average Tier 1 capital adequacy ratio (CAR) of Saudi-listed banks declined to 17.76% by the end of Q3 2022, from 18.21% a year earlier, data compiled by Argaam showed.
Meanwhile, the average capital adequacy ratio (Tier 1 +Tier 2) for Saudi banks was marginally lower to 19.37% in Q3 2022 from 19.88% a year earlier.
The capital adequacy ratio of local banks, one of the world’s highest, exceeds the 8% requirement under Basel III and the threshold of the Saudi Central Bank (SAMA).
Since the global financial crisis in 2008-2009, Saudi banks' capital adequacy ratios have seen constant increases, driven by strong profitability, higher reserves, as well as several banks' Tier 2 issuances such as sukuks and bonds.
Local banks have been gradually implementing the Basel III accord since January 2016.
|
CAR in Q3 2022 (SAR bln) |
|||
|
Period |
Q3 2021 |
Q3 2022 |
Change |
|
Risk Weighted Assets - Basel 1 |
2317.7 |
2552.3 |
+10.1% |
|
Tier 1 Capital |
422.0 |
453.2 |
+7.4% |
|
Tier 2 Capital |
38.7 |
41.0 |
+6.1% |
|
Tier 1 & 2 Capital |
460.7 |
494.3 |
+7.3% |
|
Average CAR (Tier 1) |
18.21% |
17.76% |
(0.45%) |
|
Average CAR (Tier 1 + 2) |
19.88% |
19.37% |
(0.51%) |
The following table shows the solvency ratio of Saudi banks since Q3 2021:
|
CAR since Q3 2021 (SAR mln) |
|||||
|
Period |
2021 |
2022 |
|||
|
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
|
|
Risk Weighted Assets - Basel 1 |
2317.7 |
2370.6 |
2447.3 |
2522.3 |
2552.3 |
|
Tier 1 Capital |
422.0 |
430.7 |
448.1 |
447.2 |
453.2 |
|
Tier 2 Capital |
38.7 |
40.5 |
40.6 |
40.9 |
41.0 |
|
Tier 1 & 2 Capital |
460.7 |
471.1 |
488.7 |
488.1 |
494.3 |
|
Average CAR (Tier 1) |
18.21% |
18.17% |
18.31% |
17.73% |
17.76% |
|
Average CAR (Tier 1 + 2) |
19.88% |
19.87% |
19.97% |
19.35% |
19.37% |
*Excluding Samba
Tier 1 capital is the core capital that includes equity capital, disclosed reserves, retained earnings, long-term loans, and bonds and sukuk to support the bank’s Tier 2 capital and operations.
Bank AlJazira reported the highest CAR in Q3 2022, while Bank Albilad recorded the lowest ratio at 17.88%.
The following table shows Saudi banks CAR by the end of Q3 2022:
|
CAR by Bank |
|||
|
Bank Name |
Q3 2021 |
Q3 2022 |
Change |
|
AlJazira |
22.86% |
20.94% |
%)1.91 ( |
|
SABB |
21.89% |
20.26% |
%)1.63( |
|
Alinma |
22.39% |
20.07% |
(2.32%) |
|
ANB |
22.30% |
19.85% |
(2.45%) |
|
BSF |
20.95% |
19.76% |
(1.19%) |
|
Al Rajhi |
17.94% |
19.57% |
+1.63% |
|
SAIB |
21.54% |
19.25% |
(2.29%) |
|
Riyad |
19.31% |
19.06% |
(0.26%) |
|
SNB |
18.78% |
18.66% |
(0.12%) |
|
Albilad |
18.73% |
17.88% |
(0.85%) |
|
Total |
19.88% |
19.37% |
(0.51%) |
Basel Committee on Banking Supervision was formed in 1974 by 10 central banks and issued the first banking supervision standards in 1988. The most important is the capital adequacy ratio standard (ratio of capital to risk-weighted assets), which was set at minimum 8% to ensure the provision of the necessary capital against credit maturity risks. It was implemented in 1992 and is known as Basel I.
In 2006, Basel II was applied, which took into account the operational and market risks as well as the credit risks, with the ratio remaining at 8%.
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