Saudi Arabia's Banking Sector Witnesses Robust Growth Driven by Mortgages, Government Support

(MENAFN) According to a recent report by S&P Global Ratings, Saudi Arabia's banking sector has experienced rapid growth in recent years, primarily propelled by mortgages and continued government support. The Saudi government has played a pivotal role in facilitating the expansion of banks' mortgage portfolios and improving the structure of their balance sheets, aligning with the objective of achieving a 70 percent home ownership rate outlined in Vision 2030.

S&P Global Ratings emphasized that the government has created the necessary infrastructure to enable banks to divest their mortgage portfolios and enhance the quality of their balance sheets. This strategic move aims to increase access to affordable housing and promote home ownership, which are critical components of the country's long-term development goals.

The report highlighted the growth disparity between private sector deposits and deposits from the government and its related entities. Over the past five years, private sector deposit growth averaged around 5 percent, while government deposits experienced significant growth of 14 percent. At the end of 2022, the Saudi Central Bank (SAMA) held substantial deposits from the government amounting to SR637.5 billion (USD170 billion).

S&P Global Ratings pointed out that this significant government deposit base with SAMA provides the potential for easing liquidity constraints. In response to liquidity stress in 2022, SAMA intervened by injecting SR50 billion into the banking system. The agency expects that SAMA will continue to provide liquidity support to the banking sector when needed.

Dr. Mohamed Damak, Senior Director and Head of Islamic Finance at S&P Global Ratings, emphasized the continued importance of the Saudi banking system in financing Vision 2030 projects. He projected high single-digit percentage loan growth in the coming years, highlighting that banks can achieve this by mobilizing additional resources through deposits or local and international issuances.

The report's findings indicate the positive outlook for Saudi Arabia's banking sector, as it continues to serve as a crucial source of funding for the ambitious projects outlined in Vision 2030. The government's support in enhancing the structure of banks' balance sheets, coupled with the potential for increased liquidity through government deposits, bodes well for the sector's ability to meet the financing needs of key developmental initiatives.


Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.