ALVAREZ & MARSAL RELEASES SAUDI ARABIA BANKING PULSE FOR Q1 2025
- Profitability improves as net income rises 6.3% QoQ, supported by higher non-interest income and lower impairments.
- Loan-to-deposit ratio increases to 106.1%, driven by a 7.5% surge in corporate lending.
- Cost efficiency strengthens, with the cost-to-income ratio improving to 29.8% as operating expenses decline.
Kingdom of Saudi Arabia - June 30th, 2025 - Leading global professional services firm Alvarez & Marsal (A&M) has released its latest edition of the Kingdom of Saudi Arabia (KSA) Banking Pulse for Q1 2025. The report, which analyzes the performance of the Kingdom’s 10 largest listed banks for the first quarter of 2025, highlights a strong start to the year marked by improved profitability, cost discipline, and accelerating corporate credit growth.
Lending momentum accelerated to 5.4 percent quarter-on-quarter (QoQ), driven by 7.5 percent growth in corporate loans, while deposits increased by 4.0 percent QoQ. That said, the aggregate loan-to-deposit ratio (LDR) rose to 106.1 percent, the highest in recent quarters.
Operating income increased by 3.2 percent QoQ, bolstered by a 9.6 percent surge in non-interest income, while operating expenses declined by 1.7 percent QoQ. This resulted in a 149-basis point improvement in the cost-to-income (C/I) ratio, which declined to 29.8 percent. Aggregate net income rose by 6.3 percent QoQ to SAR 22.2 billion, supported by a 15.8 percent decline in impairment charges. Return on equity (RoE) improved by 44 basis points to 15.3 percent, while return on assets (RoA) edged up to 2.1 percent.
The country’s 10 largest listed banks analyzed in A&M’s KSA Banking Pulse are Saudi National Bank (SNB), Al Rajhi Bank, Riyad Bank (RIBL), Saudi British Bank (SABB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Bank Albilad (BALB), Saudi Investment Bank (SIB) and Bank Aljazira (BJAZ).
Mr. Sam Gidoomal, Managing Director and Head of Middle East Financial Services, noted: “Saudi banks are entering a new strategic phase marked by stronger capital stewardship and a focus on unlocking liquidity through innovation - from potential mortgage securitization to targeted portfolio rebalancing. This financial agility, combined with solid credit growth and cost control, positions the sector to actively support Vision 2030 priorities and channel capital toward infrastructure and giga-projects.”
The prevailing trends identified for Q1 2025 are as follows:
- Lending momentum accelerated, with net loans and advances rising by 5.4% QoQ, driven by a 7.5% increase in corporate lending, which now represents over half of total gross loans.
- Deposit growth rebounded, increasing by 4.0% QoQ, led by an 8.1% rise in time deposits, reversing the decline seen in the previous quarter.
- Loan-to-deposit ratio (LDR) rose to 106.1%, reflecting faster credit expansion relative to funding growth - the highest LDR level in recent quarters.
- Operating income increased by 3.2% QoQ, supported by a 9.6% rise in non-interest income, particularly from trade finance, foreign exchange, and investment gains.
- Cost-to-income ratio improved to 29.8%, down 149bps QoQ, as banks controlled expenses and enhanced operating efficiency.
- Net income rose by 6.3% QoQ to SAR 22.2 billion, underpinned by a 15.8% decline in impairment charges, with profitability ratios strengthening across the sector.
OVERVIEW
The table below sets out the key metrics:
| CATEGORY | METRIC | Q4 2024 | Q1 2025 |
| Size | Loans and Advances Growth (QoQ) | 3.3% | 5.4% |
| Deposits Growth (QoQ)) | -1.3% | 4.0% | |
| Liquidity | Loan-to-Deposit Ratio (LDR) | 104.7% | 106.1% |
| Income & Operating Efficiency | Operating Income Growth (QoQ) | 1.1% | 3.2% |
| Operating Income / Assets | 3.6% | 3.6% | |
| Non-Interest Income / Operating Income | 21.7% | 23% | |
| Yield on Credit (YoC) | 8.4% | 8.0% | |
| Cost of Funds (CoF) | 3.5% | 3.3% | |
| Net Interest Margin (NIM) | 2.94% | 2.87% | |
| Cost-to-Income Ratio (C/I) | 31.3% | 29.8% | |
| Risk | Coverage Ratio | 161.0% | 154.8% |
| Cost of Risk (CoR) | 0.34% | 0.27% | |
| Profitability | Return on Equity (RoE) | 14.8% | 15.3% |
| Return on Assets (RoA) | 2.0% | 2.1% | |
| Return on Risk-Weighted Assets (RoRWA) | 2.7% | 2.7% | |
| Capital | Capital Adequacy Ratio (CAR) | 19.7% | 19.3% |
Source: Financial statements, investor presentations, A&M analysis
Mr. Asad Ahmed, A&M Managing Director, Financial Services commented: “The uptick in lending and deposit mobilization reflects improving business confidence and a rebalancing of liquidity across the sector. While margin pressures persist amid interest rate normalization, the decline in impairments and growth in fee-based income indicate that banks are diversifying their revenue streams and adapting effectively to the evolving environment.”
Methodology
A&M’s KSA Banking Pulse examines data of the 10 largest listed banks in the Kingdom, comparing the Q1 25 results against Q4 24 results. Using independently sourced published market data and 16 different metrics, the report assesses banks’ key performance areas, including size, liquidity, income, operating efficiency, risk, profitability, and capital.
The country’s 10 largest listed banks analyzed in A&M’s KSA Banking Pulse are Saudi National Bank (SNB), Al Rajhi Bank, Riyad Bank (RIBL), Saudi British Bank (SABB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Bank Albilad (BALB), Saudi Investment Bank (SIB) and Bank Aljazira (BJAZ).
About Alvarez & Marsal
Founded in 1983, Alvarez & Marsal is a leading global professional services firm. Renowned for its leadership, action and results, Alvarez & Marsal provides advisory, business performance improvement and turnaround management services, delivering practical solutions to address clients' unique challenges. With a world-wide network of experienced operators, world-class consultants, former regulators and industry authorities, Alvarez & Marsal helps corporates, boards, private equity firms, law firms and government agencies drive transformation, mitigate risk and unlock value at every stage of growth.
To learn more, visit: AlvarezandMarsal.com.
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