Saudi Arabia’s banking sector recorded slower credit growth in February, rising 0.5% month-on-month and 9.6% year-on-year, down from 0.7% m-o-m in January and an average of 0.9% in 2025.
Despite the moderation, corporate lending remained strong, increasing 0.7% m-o-m and 13.6% y-o-y, whilst retail lending was more subdued at 0.2% m-o-m and 4.8% y-o-y, according to an Al Rajhi Capital report.
Mortgage activity also weakened, with monthly originations falling to SAR5.4 billion—down 13.2% from the previous month and 39.7% year-on-year—below both the second-half 2025 average of SAR5.6 billion and the full-year 2025 average of SAR6.7 billion.
On the funding side, deposits grew faster than credit, rising 2.3% m-o-m, driven by gains in quasi deposits (+3.7%) and demand deposits (+2.9%). Demand deposit growth was largely supported by government inflows (+12.7%), whilst time deposits increased at a slower pace of 1.1%, led by private sector contributions (+3.0%). The share of time deposits edged down slightly by 46 basis points but remained high at 39.4%.
Liquidity conditions improved as deposit growth outpaced lending for the second consecutive month. The simple loan-to-deposit ratio (LDR) declined by 200 basis points to 109.7%, whilst the adjusted LDR fell by 39 basis points to 79.2%. Although liquidity indicators such as the SAIBOR–Term SOFR spread have improved from late 2025 levels, they remain elevated compared to historical averages.
Consumer spending, including point-of-sale transactions, cash withdrawals, and e-commerce, dropped 5.5% month-on-month in February to SAR133.5 billion, though it remained up 8.4% year-on-year. The decline was led by e-commerce, which fell 6.6% m-o-m despite strong annual growth of 45.6%.
Profitability remained broadly stable, with profit before Zakat and tax holding steady year-on-year at SAR8.3 billion in February. For the first two months of 2026, profits rose 2.4% compared to the same period last year.
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