Closing Bell: Saudi main index edges down 0.63% to close at 12,035

RIYADH: Saudi banks posted strong financial results in January, with aggregate profits rising 16 percent year on year to SR8.14 billion ($2.17 billion), according to newly released data. 

Figures from the Saudi Central Bank, also known as SAMA, representing pre-zakat and pre-tax earnings, highlight the sector’s resilience and growing profitability. 

The surge comes as total bank loans in Saudi Arabia exceeded SR3 trillion for the first time, marking a 14.66 percent annual increase — the fastest pace since October 2022. 

A key driver of this growth has been increased business financing, particularly in real estate, manufacturing, and trade. As lending to these sectors expands, banks benefit from higher interest income, reinforcing their financial performance and their role in supporting economic diversification under Vision 2030.  

Saudi banks closed 2024 with record-high cumulative profits of SR89.1 billion, with December marking the highest monthly earnings. 

The sector has also benefited from government stimulus efforts aimed at supporting businesses, enhancing credit access, and driving infrastructure development. To sustain growth, Saudi banks have tapped into the bond market, securing additional capital for lending and investments, further strengthening their financial positions amid economic fluctuations. 

Additionally, the sector has effectively adapted to shifting economic conditions, including fluctuating interest rates that have influenced lending practices and consumer behavior. 

According to S&P Global, Saudi banks are set for continued profitability, driven by higher lending growth, a favorable economic environment, and lower interest rates. 

The forecast suggests that non-performing loan formation will remain slow amid lower interest rates, with S&P Global projecting NPLs to rise to 1.7 percent of systemwide loans by the end of 2025, up from 1.3 percent in September 2024. 

However, the increase in NPLs is expected to be gradual, with no significant write-offs anticipated in the near future. 

S&P Global also sees credit growth as a key driver of bank profitability, with return on assets projected to stabilize between 2.1 and 2.2 percent, in line with the 2024 estimate. 

This, along with a strong provisioning cushion, will help mitigate potential credit losses, which are expected to range between 0.50 and 0.60 percent of total loans over the next 12-24 months. 

However, despite the benefits of increased lending, challenges remain. The net interest margin is projected to decline by 20-30 basis points by the end of 2025, primarily as SAMA aligns with US Federal Reserve rate cuts to maintain the currency peg. 

Additionally, the repricing of largely floating corporate loans — accounting for 50 percent of total loans, according to S&P Global — is expected to lower interest income. 

This impact will be partially offset by fixed-rate and long-term mortgages, which comprise 25 percent of the total loan portfolio. 

In the broader picture, while lower interest rates may reduce funding costs, a sharp decline could shift consumer preferences toward demand deposits, potentially affecting overall bank funding. 

Data from SAMA showed that demand deposits hit a record high of SR1.68 trillion in January, while time and savings accounts declined slightly from their November peak of SR989.99 billion to SR985.03 billion, as interest rates edged lower. 

Despite these pressures, Saudi banks are expected to remain resilient, with a solid foundation for sustained profitability into 2025, according to the agency. 

JEDDAH: French maritime company CMA CGM has added new BIGEX3 and BIGEX4 services at two Saudi ports, enhancing connectivity and boosting the Kingdom’s global trade and competitiveness.

The Saudi Ports Authority, also known as Mawani, announced the addition of the new shipping services to Jeddah Islamic Port and King Abdulaziz Port in Dammam.

The BIGEX3 service connects Jeddah Islamic Port with three global and regional ports: Nhava Sheva, a major container port in Maharashtra’s Mumbai Metropolitan region; Mundra Port in Gujarat; and Salalah Port in Oman, with a total capacity of 2,633 twenty-foot equivalent units.

The BIGEX4 service links King Abdulaziz Port on the Kingdom’s eastern coast with the two Indian terminals and Umm Qasr Port in Iraq, offering a total capacity of 3,527 TEUs. Combined, both services have a total capacity of 6,160 TEUs, according to a Mawani statement.

This initiative is part of Mawani’s efforts to strengthen strategic partnerships with leading regional and international shipping lines. It also aims to establish the Kingdom as a global logistics hub and a key connector between the three continents, the authority said in a statement.

The addition aligns with the body’s strategy to enhance Saudi Arabia’s global maritime connectivity, optimize port operations, and strengthen trade relations with international markets. It also supports the National Transport and Logistics Strategy, a plan to transform the Kingdom into a global logistics hub and reinforce its role as a key center for international trade and transport.

The authority emphasized that these services will enhance the competitive advantage of Jeddah Islamic Port and King Abdulaziz Port, optimize their operational efficiency, boost competitiveness, and facilitate global trade, as well as create new business opportunities.

In February, Mawani announced the addition of a new shipping service by Caerus, which will connect Jeddah Islamic Port with İskenderun Port in Turkiye and Latakia Port in Syria — offering a capacity of 858 TEUs.

It also introduced five new shipping services by Hapag-Lloyd and Maersk at Jeddah Islamic Port, King Abdulaziz Port, and Jubail Commercial Port to strengthen the Kingdom’s docks and boost its regional and global competitiveness.