In the second quarter of 2025, Saudi Arabia’s banking sector saw an 18% increase in net profit compared to the same period last year, reaching 22.9 billion riyals ($6.1 billion). This performance exceeded expectations, driven primarily by strong results from Al Rajhi Bank and Saudi National Bank.

Here’s a breakdown of the key trends:

• Lending and Liquidity: Lending grew faster than deposits, pushing the loan-to-deposit ratio to 106%. However, net interest margins (NIMs) narrowed due to tighter liquidity and increased competition for corporate loans.

• Future Outlook: Most banks are expecting fewer interest rate cuts than initially hoped for, which, along with higher competition, led six of the nine banks to lower their NIM projections for 2025. As a result, many lenders plan to focus more on profitability than on loan growth for the remainder of the year.

• Asset Quality: Despite a drop in oil prices, banks reported that their non-performing assets remained under control and that they had strong recovery rates in the first half of the year. The report also notes that banks are well-prepared to handle a new 1% countercyclical capital buffer set to take effect in 2026.