• Time deposits are on an upward trajectory (+7.9 percent QoQ), as consumers choose to benefit from the higher yields
  • Slowdown in credit growth anticipated in the coming quarters

Kingdom of Saudi Arabia: Leading global professional services firm Alvarez & Marsal (A&M) has released its latest Saudi Arabia (KSA) Banking Pulse for Q2 2023. The report highlights that despite a decrease in impairment charges in Q2’2023, only marginal improvements in profitability were recorded by the Kingdom’s lenders. As impairment charges decreased by 23.3 percent QoQ, cost of risk improved by 13 basis points (bps) QoQ. Higher operating expenses (+2.4 percent QoQ) worsened the cost efficiency, deteriorating the cost-to-income (C/I) ratio by 95bps QoQ. This resulted in slowing down the net income growth (+0.3 percent QoQ) to SAR 17.4bn.

Return on equity (RoE) declined by 21bps QoQ to 14.9 percent, while return on assets (RoA) remained stable at 2 percent. KSA banks witnessed moderate growth in both lending and deposit mobilization. Loans & advances (L&A) increased by 2.6 percent QoQ while deposits growth moderated to 1.7 percent QoQ. Operating income declined marginally by 0.7 percent QoQ, due to flat NII growth and decline in non-core income (-3.2 percent QoQ).

Using independently sourced published market data and 16 different metrics, A&M’s KSA Banking Pulse assesses banks’ key performance areas, including size, liquidity, income, operating efficiency, risk, profitability, and capital, tracking Q2’23 results against Q1’23. The report also offers an overview of the key developments affecting the banking sector in the Kingdom.

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).

The prevailing trends identified for Q2 2023 are as follows:

  • L&A increased by 2.6 percent QoQ mainly driven by growth in corporate / wholesale lending (+3.6 percent QoQ). Deposits increased by 1.7 percent QoQ driven by growth in time deposits (+7.9 percent QoQ). Consequently, aggregate loan-to-deposit ratios (LDR) for the top 10 banks increased 0.8 percentage points QoQ to 96.1 percent.
  • Total operating income decreased marginally by 0.7 percent QoQ in Q2’23. Aggregate net interest income (NII) was flat for the quarter at SAR 25.3bn, whereas non-core income decreased by 3.2 percent QoQ, driving the overall decline in total operating income. As SAIBOR increased by 30bps in Q2’23, aggregate total interest cost increased by 20.9 percent QoQ.
  • Aggregate net interest margin (NIM) contracted by 8bps in Q2’23 on the back of spread contraction and the lag effect of decline in LDR in the previous quarters. Yield on credit (+38bps QoQ) increased to 7.8 percent due to the rise in benchmark rates while the cost of funds increased by 39bps QoQ to 2.7 percent. Seven out of the top 10 banks in KSA reported a contraction in NIM.
  • Cost-to-income (C/I) ratio deteriorated by 95bps QoQ to reach 31.8 percent. The deterioration was a result of higher operating expense (+2.4 percent QoQ) as opposed to a decline in operating income (-0.7 percent QoQ).
  • The cost of risk improved by 13bps QoQ to settle at 0.4 percent in Q2’23 as aggregate impairment charges declined by 23.3 percent QoQ. Nine out of the top ten banks reported an improvement in cost of risk.
  • Aggregate net profit of the top 10 KSA banks grew marginally (+0.3 percent QoQ) in Q2’23 mainly on the back of lower impairment charges. The slow growth in net income resulted in RoE shrinking to 14.9 percent (-21bps QoQ), whereas RoA was stable at 2.0 percent for the quarter.


The table below sets out the key metrics:



Q1 2023

Q2 2023


Loans and Advances Growth (QoQ)



Deposits Growth (QoQ)




Loan-to-Deposit Ratio (LDR)



Income & Operating Efficiency

Operating Income Growth (QoQ)



Operating Income / Assets



Non-Interest Income / Operating Income



Yield on Credit (YoC)



Cost of Funds (CoF)



Net Interest Margin (NIM)



Cost-to-Income Ratio (C/I)




Coverage Ratio



Cost of Risk (CoR)




Return on Equity (RoE)



Return on Assets (RoA)



Return on Risk-Weighted Assets (RoRWA)




Capital Adequacy Ratio (CAR)



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

Mr. Asad Ahmed, A&M Managing Director and Head of Middle East Financial Services, commented: “Profitability for the KSA banks marginally improved during the quarter owing to a substantial decrease in impairment costs. Lenders saw a slight drop in operating income due to flat net interest income (NII) growth and a decline in non-core income. Consolidated balance sheets and capital position of Saudi Arabian banks continues to be strong.

“Looking forward, if Saudi Central Bank (SAMA) continues to match policy rate hikes by the US Federal Reserve, as we have seen in the past, we expect banks to face a slowdown in credit growth and some pressure on the loan book due to the  economic environment.


About Alvarez & Marsal

Companies, investors and government entities around the world turn to Alvarez & Marsal (A&M) for leadership, action and results. Privately held since its founding in 1983, A&M is a leading global professional services firm that provides advisory, business performance improvement and turnaround management services. When conventional approaches are not enough to create transformation and drive change, clients seek our deep expertise and ability to deliver practical solutions to their unique problems.

With over 8,000 people providing services across six continents, we deliver tangible results for corporates, boards, private equity firms, law firms and government agencies facing complex challenges. Our senior leaders, and their teams, leverage A&M’s restructuring heritage to help companies act decisively, catapult growth and accelerate results. We are experienced operators, world-class consultants, former regulators and industry authorities with a shared commitment to telling clients what’s really needed for turning change into a strategic business asset, managing risk and unlocking value at every stage of growth.

A&M operates in the Middle East from its offices in Riyadh, Dubai and Abu Dhabi.

To learn more, visit: AlvarezandMarsal.com. Follow A&M on LinkedIn, X (formerly Twitter), and Facebook.

Seán Lawless
 Hanover Middle East
Sandra Sokoloff, Senior Director of Global Public Relations
Alvarez & Marsal