Saudi Arabia: Saudi banks aggregate profit before zakat and tax reached an all time high of SR7.83 billion ($2.1 billion) in July, marking an annual 23 percent rise, newly released data has revealed.

According to the Kingdom’s central bank, also known as SAMA, from January to the end of July the financial institutions reported total profits of SR50.22 billion, up 13 percent from SR44.5 billion during the same period last year.

Total deposits grew by 8 percent during this period, reaching SR2.64 trillion, with term deposits experiencing the highest growth at 20 percent, totaling SR930.24 billion.

Demand accounts, which make up 53 percent of total deposits, saw a more modest increase of 5 percent, bringing the total to SR1.4 trillion.

On the asset side, total bank credit rose to SR2.79 trillion, marking a 12 percent increase in July compared to the same month of 2023.

The loans-to-deposits ratio, a key metric for assessing a bank’s liquidity, climbed to 80.73 percent, up from 78.84 percent a year earlier.

The expansion of Saudi Arabia’s banking sector is being driven by a combination of favorable economic conditions and strategic initiatives.

High oil prices, coupled with continued government spending, have created a robust operating environment for banks, enabling them to support the Kingdom’s ambitious giga-projects and the broader Vision 2030 strategy.

This economic backdrop has also contributed to solid non-oil GDP growth, further bolstering the banking industry’s performance.

In addition to these traditional growth drivers, the rise of fintech is playing a transformative role in reshaping the sector’s landscape.

SAMA has been pivotal in regulating this sector, ensuring that innovation thrives within a secure and well-governed framework.

By implementing initiatives such as the open banking framework and supporting fintech companies through its regulatory sandbox, SAMA is driving technological advancements that enhance efficiency, improve consumer experience, and expand financial inclusion.

High interest rates in the Kingdom have further boosted profits on loans, as banks benefit from the increased interest income. 

However, this environment has also intensified competition among financial institutions for financing opportunities, as they vie to attract borrowers and secure their market share.

McKinsey’s research on the Saudi banking sector revealed that the those institutions distinguishing themselves are those increasingly focused on meeting the high expectations of young, tech-savvy consumers — a strategy that offers a significant competitive advantage.

The research underscores a strong link between positive customer experiences and improved financial performance, demonstrated by higher cross-sell and retention rates.

To capitalize on this trend, GCC banks are fully digitizing their customer journeys, transforming every step from the initial touchpoint to successful fulfillment.

In the UAE and Saudi Arabia, several banks are reimagining both retail services, such as onboarding, personal loans, credit cards, and home financing, and corporate services, including MSME and midsize corporate onboarding and credit renewals.