• Loan-to-deposit dynamics remained stable, with lending growth steady but funding expansion easing amid softer deposit mobilization.
  • Cost efficiency continued to strengthen as banks enhanced operational discipline for a third consecutive quarter.

Kingdom of Saudi Arabia – Leading global professional services firm Alvarez & Marsal (A&M) has released its latest edition of the Kingdom of Saudi Arabia (KSA) Banking Pulse for Q3 2025. The report, which analyzes the performance of the Kingdom’s 10 largest listed banks for the third quarter of 2025, highlights steady lending momentum, moderated deposit growth, resilient profitability, and continued improvements in asset quality.

Aggregate gross loans and advances increased 2.5 percent quarter-on-quarter (QoQ), maintaining a steady pace of expansion. Corporate lending, which accounts for roughly 59% of total loans, grew 3.0 percent QoQ, while retail lending rose 1.7 percent QoQ, marking an acceleration relative to Q2. Deposit growth moderated to 2.2 percent QoQ, down from 2.7 percent in Q2, led by declines at SNB across both CASA (-2.5% QoQ) and time deposits (-7.9% QoQ). Government-related entity (GRE) deposits saw a minor decline, with their share decreasing to 31.2 percent of total deposits.

Operating income increased by 1.8 percent QoQ, a slight moderation from the 2.0 percent QoQ increase in Q2. Net interest income was broadly flat at +0.1 percent QoQ, while fee and commission income rose 3.8 percent QoQ. Strong gains in other operating income (+12.6 percent QoQ) - notably from SNB (+34.1% QoQ) and Al Rajhi (+15.3% QoQ), supported overall revenue. Aggregate net income grew 2.8 percent QoQ, compared to 3.4 percent QoQ in Q2.

Net interest margin (NIM) contracted by 7bps to 2.73 percent, reflecting continued pressure from rising funding costs. Cost of funds (CoF) increased 22bps QoQ to 3.6 percent, while yield on credit (YoC) rose 17bps QoQ to 8.2 percent, compressing the spread further. Nevertheless, banks demonstrated stronger cost discipline, with operating expenses declining 0.9 percent QoQ, driving the third consecutive quarter of C/I improvement. The aggregate cost-to-income ratio (C/I) fell 80bps QoQ to 28.7 percent, supported by efficiency gains at major banks including SNB (24.6%, -4.5% QoQ) and RIBL (29.1%, -20bps QoQ).

Return on equity (RoE) edged higher by 6bps to 15.5 percent, while return on assets (RoA) remained steady at 2.1 percent, underscoring sustained sector resilience.

The country’s 10 largest listed banks analyzed in A&M’s KSA Banking Pulse are Saudi National Bank (SNB), Al Rajhi Bank, Riyad Bank (RIBL), Saudi British Bank (SAB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Bank Albilad (BALB), Saudi Investment Bank (SAIB), and Bank Aljazira (BJAZ).

Mr. Sam Gidoomal, Managing Director and Head of Middle East Financial Services, noted: “Saudi banks continued to demonstrate operational resilience during Q3 2025, supported by stable lending activity, disciplined cost management, and improving asset quality. Despite margin compression, the sector’s strong capital position and consistent efficiency gains position banks well as they prepare for an evolving interest-rate environment in 2026.”

Mr. Quentin Mulet-Marquis, Managing Director, Financial Services commented: “Saudi banks are maintaining solid financial foundations despite periods of global market volatility. Strong earnings, low NPL rates, and comfortable capital buffers underpin investor confidence, while healthy valuation multiples and competitive dynamics continue to support growing appetite for M&A activity in the sector.”

The prevailing trends identified for Q3 2025 are as follows:

  • Net loans and advances grew 2.5% QoQ, supported by 3.0% corporate lending growth and 1.7% retail lending growth.
  • Deposits increased 2.2% QoQ, with government deposits representing 31.2% of the total.
  • NIM contracted to 2.73%, as funding costs rose 22bps QoQ to 3.6%.
  • Cost-to-income ratio improved to 28.7%, marking the third consecutive quarter of efficiency gains.
  • Asset quality strengthened, with the NPL ratio declining to 0.94% and coverage ratio rising to 158.1%.
  • Net income increased 2.8% QoQ, supported by a sharp rise in other operating income.
  • RoE inched up to 15.5%, while RoA held steady at 2.1%.

Mr. Zeeshan Mansoor, Managing Director, Financial Services, added: “Saudi Arabia’s banks are demonstrating robust financial foundations. With continued emphasis on efficiency, risk management strategy and diversified revenue streams, they are well positioned to support economic growth and seize opportunities amid shifting market and regulatory conditions.”

OVERVIEW

The table below sets out the key metrics:

CATEGORY

METRIC

Q2 2025

Q3 2025

Size

Loans and Advances Growth (QoQ)

2.5%

2.5%

Deposits Growth (QoQ))

2.7%

2.2%

Liquidity

Loan-to-Deposit Ratio (LDR)

105.9%

106.2%

Income & Operating Efficiency

Operating Income Growth (QoQ)

2.0%

1.8%

Operating Income / Assets

3.5%

      3.5%

Non-Interest Income / Operating Income

23.8%

25.2%

Yield on Credit (YoC)

8.0%

8.2%

Cost of Funds (CoF)

3.4%

3.6%

Net Interest Margin (NIM)

2.80%

2.73%

Cost-to-Income Ratio (C/I)

29.5%

28.7%

Risk

Coverage Ratio

155.9%

158.1%

Cost of Risk (CoR)

0.25%

0.24%

Profitability

Return on Equity (RoE)

15.4%

15.5%

Return on Assets (RoA)

2.1%

2.1%

Return on Risk-Weighted Assets (RoRWA)

2.7%

2.8%

Capital

Capital Adequacy Ratio (CAR)

19.5%

20%

Source: Financial statements, investor presentations, A&M analysis

Read the report

Methodology

A&M’s KSA Banking Pulse examines data of the 10 largest listed banks in the Kingdom, comparing the Q3 25 results against Q2 25 results. Certain prior-period figures have been restated to align with the methodology applied in this edition. As a result, selected historical ratios may differ from those published previously, and have been updated to ensure consistency and comparability.

The report uses independently sourced published market data and 16 different metrics, to assess banks’ key performance areas, including size, liquidity, income, operating efficiency, risk, profitability, and capital.

The country’s 10 largest listed banks analyzed in A&M’s KSA Banking Pulse are Saudi National Bank (SNB), Al Rajhi Bank, Riyad Bank (RIBL), Saudi British Bank (SABB), Banque Saudi Fransi (BSF), Arab National Bank (ANB), Alinma Bank, Bank Albilad (BALB), Saudi Investment Bank (SIB) and Bank Aljazira (BJAZ).

About Alvarez & Marsal 

Founded in 1983, Alvarez & Marsal is a leading global professional services firm. Renowned for its leadership, action and results, Alvarez & Marsal provides advisory, business performance improvement and turnaround management services, delivering practical solutions to address clients' unique challenges. With a world-wide network of experienced operators, world-class consultants, former regulators and industry authorities, Alvarez & Marsal helps corporates, boards, private equity firms, law firms and government agencies drive transformation, mitigate risk and unlock value at every stage of growth.

To learn more, visit: AlvarezandMarsal.com.

CONTACT: Adnan Abou Rashid
Hanover Middle East