Saudi banks witness 11% surge in loans to $716bn, fueled by corporate activities

Saudi banking sector’s loans increased to SR2.68 trillion ($715.56 billion) in April, marking an 11 percent increase compared to the same month in 2023, official data showed.

Figures released by the Saudi Central Bank, also known as SAMA, indicated that personal loans constituted 47 percent of banks’ total lending, with corporate loans making up the remaining 53 percent.

The expansion of real estate projects under the Kingdom’s Vision 2030, coupled with high demand for housing credit by expatriates, as well as the digitalized and streamlined banking operations, are likely significant contributors to the growth in both personal and corporate lending.

Personal loans, encompassing all types of credit extended to individuals, totaled SR1.27 trillion, marking a 7 percent growth during this period.

The rise in this loan category can be attributed to various factors, notably the Kingdom’s commitment to homeownership plans. These initiatives have played a pivotal role in motivating individuals to pursue housing loans, bolstered by a range of government-backed programs and incentives designed to facilitate access to affordable housing options.

Additionally, the increasing number of expatriates in Saudi Arabia has heightened the demand for residential properties, leading to increased borrowing for home purchases.

Furthermore, the digitalization and streamlining of banking operations have made it more convenient for lenders to process applications and disburse funds efficiently.

With the adoption of digital banking services, borrowers can quickly request and track their loan applications through online platforms, streamlining the entire borrowing process.

These advancements in banking technology have simplified the lending process and enhanced transparency and accessibility, further fueling the growth in personal loans across the Kingdom.

Among corporate loans, those granted for real estate activities comprised the majority, accounting for 20 percent of the total and amounting to SR278.86 billion. This category saw a 27 percent increase during this period.

Closely following are loans extended for wholesale and retail trade, comprising 13 percent of corporate holdings and totaling SR190.06 billion. This category of claims saw a 9 percent annual rise.

According to an April report by The Banker, the Kingdom’s financing growth is poised to continue its upward trajectory. This rise is anticipated to be driven by sustained demand for corporate and wholesale credit, compensating for a moderation in the country’s once-dominant retail mortgage market.

Furthermore, the year 2024 holds promise as a potential turning point, as it may mark the realization of long-awaited opportunities for direct lending to the country’s giga-projects, the report added.

These opportunities, coveted by banks for years, could finally come to fruition, signaling a significant development in the region’s financial landscape.

In terms of growth rates, lending for professional, scientific, and technical activities recorded the highest annual increase among others at 52 percent, despite comprising a relatively low percentage share of total loans at SR6.3 billion.

Real estate credit within corporate activities closely followed, growing by 27 percent. Meanwhile, lending for electricity, gas, and water supplies increased by 31 percent, reaching SR151.94 billion.