Saudi Arabia’s banking sector continued its growth trajectory in the second quarter of 2025 (Q2 2025), although at a slower pace compared to the previous quarter.
Key Trends in Saudi Banking (Q2 2025)
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Profitability Still Rising: The aggregate net income of Saudi banks grew by 3.4% quarter-on-quarter (QoQ) to reach SAR 22.9 billion ($6.1 billion). However, this marks a slowdown from the 6.3% growth seen in Q1 2025.
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Slower Income Growth: Total operating income growth also slowed, increasing by 2.0% in Q2 2025, down from 3.2% in the prior quarter. This moderation was mainly due to slower growth in both net interest income and net fee and commission income.
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Note: Aggregate interest income did rebound, rising by 4.4% in Q2 2025, reversing the 1.0% decline experienced in Q1 2025.
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Moderating Credit and Deposit Growth:
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Net Loans and Advances (L&A) grew by 2.5% in Q2 2025, slowing from 5.4% in Q1 2025. The growth was primarily fueled by corporate lending, which increased by 3.9% QoQ.
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Total deposit growth also moderated, rising by 2.7%, down from 4.0% in Q1 2025.
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Outlook and Resilience: Despite the deceleration, the sector remains fundamentally strong. Experts note that banks entered the second half of 2025 (H2 2025) from a “position of strength,” supported by strong fundamentals, capital buffers, increasing profitability, and high return on equity.
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Future Headwinds and Opportunities:
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While lower interest rates could pressure profits, this is expected to be offset by higher non-interest income, lower risk costs, and strict cost control.
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Factors like robust capital buffers, healthy valuations, and increasing competition are expected to drive more merger and acquisition (M&A) activity in the Saudi banking sector.
