Saudi Arabia leads Middle Eastern banking growth amid favorable conditions: Fitch

Saudi Arabia leads Middle Eastern banking growth amid favorable conditions: Fitch
This expansion presents new business opportunities for the Kingdom’s financial institutions and heightens competition for liquidity. Shutterstock
Short Url
Updated 01 October 2024
Follow

Saudi Arabia leads Middle Eastern banking growth amid favorable conditions: Fitch

Saudi Arabia leads Middle Eastern banking growth amid favorable conditions: Fitch

RIYADH: High oil prices and interest rates are creating favorable operating conditions for banks across the Middle East, despite regional tensions, according to Fitch Ratings.

During a recent webinar on the region’s banking sector, Fitch Ratings highlighted that in Saudi Arabia, lending growth is expected to be around double the regional average of 5-6 percent for the fiscal year 2024, driven by significant non-oil gross domestic product growth.

This expansion presents new business opportunities for the Kingdom’s financial institutions and heightens competition for liquidity.

The agency noted the Gulf Cooperation Council as a standout in the global banking landscape, adding that the region is benefiting from robust oil prices, elevated interest rates, substantial government expenditure, strong non-oil sector growth, and high investor and consumer confidence.

These factors contribute to solid business conditions and healthy financial metrics for banks in most markets.

Fitch Ratings highlighted that GCC financial institutions experienced record US dollar issuance in the first quarter of 2024, fueled by favorable pricing conditions, lending increases, refinancing needs, and strong investor demand.

However, the credit rating agency noted that regional banks are currently at the peak of their cycle. Lower hydrocarbon prices pose a risk to financial operating environments across the Middle East, and each country faces unique challenges.

In contrast to Saudi Arabia, the UAE has enjoyed stronger liquidity conditions, enhancing banks’ profitability metrics in 2023 and the first quarter of 2024, with the sector’s average net interest margin improving by 100 basis points over 2022–2023.

Qatar’s banking sector notably relies on non-domestic funding, which constituted 42 percent of total holdings at the end of the first quarter of 2024. This dependence makes Qatari banks vulnerable to external political and economic shocks, as well as shifts in investor sentiment.

In October last year, Fitch Ratings affirmed that banks in the GCC are thriving due to high oil prices, contained inflation, and rising interest rates.

It also highlighted that financial institutions in the UAE are improving, and banks in Saudi Arabia, Qatar, and the UAE are well-positioned to benefit from rising interest rates due to quick loan book repricing and substantial low-cost funding.


Saudi bank lending hits record $788bn as corporate loans surge

Saudi bank lending hits record $788bn as corporate loans surge
Updated 22 sec ago
Follow

Saudi bank lending hits record $788bn as corporate loans surge

Saudi bank lending hits record $788bn as corporate loans surge

RIYADH: Saudi Arabia’s bank loans surged to SR2.96 trillion ($788 billion) in December, marking a 14.39 percent year-on-year increase, according to official data.

Figures from the Saudi Central Bank, also known as SAMA, revealed that corporate loans were the main driver, rising 18.6 percent to SR1.6 trillion.

This marks the highest annual growth for corporate loans among the lending activity data available in SAMA’s reporting since 2021.

Real estate activities dominated corporate lending, accounting for 21 percent of the total and rising by 33 percent to SR333.34 billion. This marks an increase from an 18.7 percent share in the same period last year.

Wholesale and retail trade accounted for 12.51 percent of corporate lending, reaching SR198.87 billion with an annual growth rate of 10.94 percent.

The manufacturing sector, a key component of Vision 2030’s economic diversification goals, represented an 11.51 percent share at SR182.95 billion.

Electricity, gas, and water supplies contributed 11.51 percent to the total corporate share, growing significantly by nearly 29.12 percent to reach SR182.94 billion.

Professional, scientific, and technical activities, though holding a smaller 0.51 percent share of corporate credit, witnessed the most significant surge, with a 40.76 percent annual growth rate to SR8.12 billion.

Financial and insurance activities loans followed real estate with the third-highest growth rate, increasing by 31 percent to SR136.6 billion.

On the personal loans side, which includes various financing options for individuals, the sector grew 9.87 percent annually to SR1.37 trillion. This expansion underscores the continued confidence in consumer lending and the Kingdom’s economic diversification strategies.

Saudi banks are significantly increasing their lending to the real estate sector, driven by strong demand, regulatory backing, and growing opportunities for public-private partnerships and foreign investment.

This expansion is occurring alongside a shift in monetary policy as interest rates begin to decline in line with the US Federal Reserve’s approach, creating a more favorable lending environment.

Industry experts at the Real Estate Future Forum highlighted the importance of real estate financing for financial institutions, with Ibrahim Al-Alwan, managing director and partner at Watheeq Financial Services, emphasizing that banks now hold substantial real estate portfolios, requiring effective regulation, risk management, and investment tools to optimize growth.

Structured financing solutions, such as securitization and real estate investment funds, also play a key role in attracting institutional and foreign investors.

Joe Jabbour, managing director and partner at Boston Consulting Group, highlighted that many investment structures currently in development are designed with foreign investors in mind, reflecting the sector’s international appeal.

The recent decision by Saudi Arabia’s Capital Market Authority to allow foreign investment in listed firms that own real estate in Makkah and Madinah further underscores efforts to expand capital inflows into the sector.

At the same time, major projects are reshaping the Kingdom’s real estate market, with the Public Investment Fund spearheading nine developments in the Asir region, four of which are already underway.

The region is also seeing rapid growth in hospitality infrastructure, with thousands of approved hotel rooms under development. As Saudi Arabia advances its Vision 2030 agenda, innovations such as AI-driven property solutions and 3D-printed construction are expected to further transform the sector.

The loan-to-deposit ratio in Saudi banks increased to 83.24 percent in December compared to 80.7 percent in the same period last year, according to SAMA data.

The LDR is a key indicator used by banks to measure the proportion of loans granted compared to the deposits they hold. In this case, even though the demand for loans has increased at a faster pace than deposit growth, the ratio has stayed below the regulatory limit of 90 percent.


Qatar’s inflation slows to 0.24%

Qatar’s inflation slows to 0.24%
Updated 35 min 55 sec ago
Follow

Qatar’s inflation slows to 0.24%

Qatar’s inflation slows to 0.24%

RIYADH: Qatar’s annual inflation rate eased to 0.24 percent in December, marking a slowdown from the 0.95 percent recorded in the previous month, according to the Consumer Price Index data.

The latest figures released by the National Planning Council revealed that the December figure represents the second-lowest inflation rate of the year, following the 0.22 percent recorded in July, while January posted the highest rate at 2.99 percent.

Qatar’s inflation rate in December remained lower than that of its regional peers. Saudi Arabia recorded 1.9 percent, the lowest among G20 nations but higher than Qatar, while Oman’s 0.4 percent rate in September was still above Qatar’s latest figure.

On a month-on-month basis, the general CPI rose by 0.87 percent in December, reaching 110.24 points compared to 109.29 in November. The price rise was driven by increases in several sectors, though declines in key categories helped keep overall inflation subdued.

Compared to November, five major categories saw price increases in December. The recreation and culture sector saw the highest rise at 8.84 percent, followed by restaurants and hotels at 1.50 percent.

Clothing and footwear rose by 0.66 percent, education by 0.55 percent, and furniture and household equipment by 0.16 percent. 

Meanwhile, declines were recorded in four key sectors. Food and beverages saw a decrease of 2.11 percent, while housing, water, electricity, and other fuels fell 0.83 percent. 

Transport prices fell by 0.65 percent, and miscellaneous goods and services saw a slight decline of 0.23 percent. Three sectors — tobacco, health, and communication — remained unchanged compared to the previous month. 

Over a 12-month period, prices increased across multiple sectors. The miscellaneous goods and services category recorded the largest increase at 6.56 percent, followed by communication at 4.44 percent and recreation and culture at 2.54 percent.

Moreover, restaurants and hotels saw an increase of 2.32 percent, education at 1.69 percent, transport at 1.38 percent, and clothing and footwear at 0.55 percent. 

At the same time, four major sectors experienced annual price declines. Housing, water, electricity, and other fuels dropped by 4.23 percent, while food and beverages decreased by 1.05 percent. 

Furniture and household equipment saw a 1.51 percent decline, and health services recorded a 1.01 percent decrease. The tobacco sector saw no price changes on a year-on-year basis. 

Qatar’s average inflation rate for the full year 2024 stood at 1.13 percent, marking a continued downward trend from 2.85 percent in 2023 and 5 percent in 2022.

The CPI, excluding housing, water, electricity, and other fuels, reached 115.32 points in December, representing a 1.24 percent monthly increase from November and a 1.23 percent year-on-year rise.


Oil Updates — crude little changed as Trump policies continue to drag on prices

Oil Updates — crude little changed as Trump policies continue to drag on prices
Updated 06 February 2025
Follow

Oil Updates — crude little changed as Trump policies continue to drag on prices

Oil Updates — crude little changed as Trump policies continue to drag on prices

LONDON: Oil prices edged up in Asian trading on Thursday after Saudi Arabia’s state oil company sharply raised March oil prices, but the increase was barely a blip on the biggest slide in benchmark Brent prices in nearly three months the previous day.

Brent crude futures rose 15 cents to $74.76 a barrel by 10:40 a.m. Saudi time. US West Texas Intermediate crude was up 20 cents to $71.23 a barrel.

Oil prices had fallen more than 2 percent on Wednesday as a large build in US crude and gasoline stockpiles signalled weaker demand, and as investors weighed the implications of a new round of US-China trade tariffs, including duties on energy products.

Prices have plunged about 10 percent from the 2025 highs on Jan. 15, five days before Donald Trump took over as US President. Analysts expect markets to be volatile in the coming weeks.

“We can expect significant volatility in pricing over the coming weeks and months as markets scramble to weigh the impact of Trump’s new policy positions, not least regarding tariff measures,” analysts from BMI said in a note on Thursday.

A sharp increase in prices for Asian buyers by Saudi Aramco, the world’s leading oil exporter, managed to stem Wednesday’s sell-off.

“After the overnight sell-off and the Saudi news, there is likely to be some buying from traders covering shorts ahead of a strong band of support in the $70/68 region,” said Tony Sycamore, market analyst with IG.

The US last month imposed aggressive new sanctions on Russia’s oil trade, targeting the “shadow vessels” understood to be utilized to evade trade blockades. Since assuming office, Trump has imposed tariffs on China, although they fell short of his campaign threats.

Beijing in response had announced tariffs on imports of US oil, liquefied natural gas and coal on Tuesday, but China’s purchases from the US are relatively modest, blunting the impact of the new measures.

“While some tariff measures could put upward pressure on oil prices, the net impact will likely be bearish, given their potentially adverse effects on the global economy and Trump’s proven willingness to offer carve-outs for energy (to limit impacts to supply),” BMI said. 


Saudi Venture Capital Co. invests $1bn, strengthening Kingdom’s VC leadership

Saudi Venture Capital Co. invests $1bn, strengthening Kingdom’s VC leadership
Updated 05 February 2025
Follow

Saudi Venture Capital Co. invests $1bn, strengthening Kingdom’s VC leadership

Saudi Venture Capital Co. invests $1bn, strengthening Kingdom’s VC leadership

RIYADH: Saudi Venture Capital Co. has committed $1 billion in investments to date, with its total assets— including contributions from partners— reaching approximately $4.8 billion, according to the company’s latest “Impact Report.”

The report highlights SVC’s pivotal role in expanding Saudi Arabia’s private capital ecosystem, underscoring the company’s contributions to record growth in venture capital, private equity, venture debt, and private credit markets since its inception in 2018.

To date, SVC has supported 54 funds, which together have invested in over 800 startups and small and medium enterprises across key sectors such as e-commerce, fintech, healthcare, edtech, transport, and logistics.

According to MAGNiTT, Saudi Arabia remained the top destination for VC investments in the MENA region for the second consecutive year, securing $750 million in 2024. This accounted for 40 percent of regional VC capital, with a 16 percent increase in deal flow, closing 178 deals— the most of any MENA country.

The UAE followed with $613 million, leading in deal volume with 188 deals and 12 exits.

“We are committed to further stimulating the private capital ecosystem in Saudi Arabia by launching required investment programs and developmental initiatives based on an analysis of the ecosystem’s needs,” said Nabeel Koshak, CEO and board member of SVC.

The report underscores Saudi Arabia’s continued dominance in the MENA VC landscape, reinforcing its position as the leading VC hub in the region. This achievement is closely aligned with the broader economic diversification goals outlined in Saudi Vision 2030, which seeks to transform the Kingdom’s financial sector and broader economy.

Since its launch, SVC’s strategic initiatives have played a key role in increasing investor participation in Saudi startups and SMEs. These initiatives have encouraged financial institutions to establish VC and PE funds, while also attracting both regional and international investors to the Kingdom’s growing entrepreneurial ecosystem.

In addition to its investment activities, SVC has launched several developmental programs designed to strengthen the private capital ecosystem. These programs include educational collaborations with local and global partners aimed at enhancing the skills of fund managers and investors, as well as producing market insight reports to support data-driven decision-making.

Established in 2018 as a subsidiary of the SME Bank, part of the National Development Fund, SVC focuses on stimulating and sustaining financing for startups and SMEs in Saudi Arabia.


Riyadh airport to revolutionize retail with major expansion: official

Riyadh airport to revolutionize retail with major expansion: official
Updated 06 February 2025
Follow

Riyadh airport to revolutionize retail with major expansion: official

Riyadh airport to revolutionize retail with major expansion: official

RIYADH: Saudi Arabia is set to elevate the retail experience at King Khalid International Airport in Riyadh by expanding its duty-free offerings and upgrading infrastructure to better serve passengers.

This was announced by Abdullah Al-Salem, general manager of Commercial Business Development at Riyadh Airports Co., during a panel discussion at the Retail Leaders Circle Global Forum in Riyadh on Wednesday.

Recognizing the importance of enhancing passenger experience, Al-Salem revealed: “We’ve expanded the duty-free area by 180 percent, increasing the number of SKUs (stock-keeping units) from 4,000 to 10,000. We’ve also become the first airport in the region to introduce an on-arrival duty-free store.”

The official also highlighted ongoing expansion efforts at the airport, including the construction of two new piers—A and H—which will extend terminals 1 and 4.

Al-Salem emphasized that the expansion of terminals 3 and 4, completed last year, has led to a significant boost in retail sales. “We’ve seen sales more than triple compared to previous years,” he said.

Riyadh Airports Co. has also emerged as a leader in post-pandemic retail recovery.

“We were the first airport to recover in terms of retail sales after the pandemic,” Al-Salem noted.

He pointed to the expansion of retail space in terminals 1 and 2, which has nearly doubled in size from 1,100 sq. meters to 2,400 sq. meters, attracting high-end brands.

“We now have a much better understanding of our customers,” Al-Salem added. “Passenger behavior is different from that of mall customers,” and the airport teams have developed the expertise needed to cater to their specific needs.

The panel also featured Umair Ansari, senior vice president and general manager of travel retail for Europe, the Middle East, and Africa at The Estee Lauder Companies.

Ansari discussed the evolving nature of luxury and shifting consumer preferences. “Luxury is not one-size-fits-all,” he said, emphasizing the need to understand what luxury means to individual travelers.

He also discussed the role of digitization in transforming the travel retail experience: “When you start with digitization in mind, you travel differently. We can now engage with passengers before, during, and after their journey, making the entire experience more seamless.”

Ansari also touched on the growing influence of Gen Z consumers, who make purchasing decisions based on emotions rather than product features. “If you tap into their emotions, you can create a strong connection,” he said.