Saudi banks’ exposure to Vision 2030 giga projects remains modest but is likely to rise as some projects become operational, Fitch Ratings says.

Delays in giga-project execution or substantial recalibration of their scale could affect the banking sector’s asset-quality metrics in the longer term. However, current low exposure means the projects are unlikely to lead to significant increases in system-wide Stage 2 and Stage 3 loans ratios in 2026-2027, the agency said.

Fitch still expects the combined value of five major giga projects – NEOM, Qiddiya, Red Sea Global, ROSHN and Diriyah – to be more than $1 trillion at completion, despite the recently announced recalibration of some projects. However, only about $115 billion of giga-project contracts have been awarded since 2019. 

"We estimate about half of their total funding, including debt and capital, has been financed by the Public Investment Fund (A+/Stable). Recourse to bank borrowing is low but has been increasing," it said.

Modest bank financing

Fitch estimates that bank financing to giga projects was a modest 5%-7% of average sector loans at end-2025. Some banks also have exposure via guarantees and irrevocable commitments, which should put total exposure to giga projects, both on- and off-balance-sheet, below 10% of the sector’s combined credit risk.

"We expect banks’ giga-project financing to rise as projects approach operational phases and financing can be supported by cash flows. We believe this type of financing mostly carries risk-weighting of around 80%-130%, so greater lending to these initiatives could weigh on capital. This, coupled with more stringent capital regulation, could encourage banks to make greater use of tools such as residential mortgage-backed securities (RMBS) and significant risk transfers (SRTs) to relieve pressure on capital ratios, or to adjust their dividend payouts," it said.

Supporting corporate credit demand

Fitch expects Vision 2030’s large, non-giga-project infrastructure initiatives to support corporate credit demand over the long term. New project awards fell by almost 50% in 2025, but the value of contracts awarded since 2022 is about $435 billion (about 32% of Fitch-forecast GDP in 2026), providing significant business opportunities for banks.

Corporate borrowing is likely to remain a key driver of medium-term credit growth; corporate loans have grown at an annual average of about 16% since 2022, accounting for almost 80% of new loans in 2025. Nevertheless, we expect banking sector financing growth to reduce to about 10% in 2026 (2025: 11.5%), factoring in the lower number of projects to be awarded.

The share of bank lending going to SMEs rose to 11% at end-3Q25 (end-2019: 6%). This remains below the 20% target for 2030 under Vision 2030. Fitch expects a moderate acceleration in SME lending growth, supported by the lower risk-weighted asset (RWA) density of SME financing, which is 75% risk-weighted under final Basel III rules.

Domestic liquidity conditions tighten

Domestic liquidity conditions have tightened in recent years, with the sector loans/deposits ratio increasing to 113% at end-2025 (end-2024: 110%). We still expect financing requirements for broader Vision 2030 projects to translate into sustained strong bank loan growth, despite the announced recalibration. This will, in turn, drive greater diversification of Saudi banks’ funding sources, underpinning further growth of Saudi Arabia’s debt capital markets, including international issuance.

"We expect mortgage securitisation to pick up from 2026 as interest rates decline and banks seek to free up liquidity and reduce pressure on capital ratios. Rising RMBS issuance by the Saudi Real Estate Refinance Company (A+/Stable) could unlock sizeable liquidity, given the size of banks’ mortgage books (collectively SAR726 billion, about 22% of sector loans at end-3Q25). Alongside SRTs, this could also support banks’ capital ratios, via RWA relief," it said. 

Copyright 2026 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. (Syndigate.info).