Saudi retail lending to remain high-growth segment: Fitch

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Fitch Ratings expects retail lending to remain a high-growth segment in Saudi Arabia as banks' appetite of recent years remains high, largely driving credit growth for the sector, according to a recent report.
 

This mitigates the impact of the pandemic on the banks' financial profiles, although some risks are emerging, it added.
 

According to the ratings agency, strong credit demand and support from the authorities underpin the recent rapid growth in this historically ignored segment.
 

The banking sector's lending grew by 11.5% in the first nine months of 2020, led by retail mortgages with 41%, said Fitch, expecting mortgage growth to continue backed by strong demand and government subsidy.

Fitch also indicated that returns on retail portfolios are underpinned by impressively low funding costs, with loans largely funded by non-interest-bearing deposits and the absence of caps on loan pricing.

It added that banks with a larger share of retail lending therefore have profitability metrics at the higher end of the sector.