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RIYADH: Saudi banks’ aggregate profit reached SR7.7 billion ($2.05 billion) in October, marking a 23.67 percent year-on-year increase, newly released data has revealed. 

According to the Saudi Central Bank, also known as SAMA, these figures represent profits before zakat and taxes. 

Cumulatively, from the beginning of the year to the end of October, banks recorded a total profit of SR73.28 billion, compared to SR64.47 billion during the same period last year. 

The increase in banks’ profits is primarily attributed to a combination of favorable factors that highlight the sector’s strength and ability to adapt.  

The third quarter of 2024 marked a significant turning point, with non-interest income playing a pivotal role.

According to a Fitch Ratings report published in November, strong gains on securities and trading contributed SR1.4 billion to non-interest income, offsetting higher financing impairment charges and helping push combined quarterly profits to SR20 billion.  

This growth followed SAMA’s decision to implement a 50-basis-point interest rate cut in September, which mirrored the US Federal Reserve’s shift toward a more accommodative monetary policy. 

The rising interest rate environment that characterized much of the Gulf region in recent years had previously bolstered bank returns on loans, as higher borrowing costs translated into greater income from financing activities. 

However, this dynamic also increased funding costs, particularly for savings accounts and external liabilities.   

Many Saudi banks navigated these challenges by diversifying their funding sources, tapping into external markets, and issuing a record $13 billion in debt in the first eight months of 2024 to meet growing foreign-currency financing demands, particularly for giga-projects.  

Despite these efforts, deposit growth in the third quarter of 2024 lagged behind earlier quarters, according to Fitch, reflecting the sector’s strategic pivot toward external funding to sustain its expansion.  

The recent shift in monetary policy by the US Federal Reserve, which influences rates in ��������Ƶ due to the riyal’s peg to the dollar, has injected new dynamics into the financial landscape. 

After a period of aggressive rate hikes to combat inflation, the Fed lowered interest rates by 50 basis points in September, followed by successive 25-basis-point cuts in November and December, signaling a focus on boosting economic growth as inflation eased to acceptable levels. 

This policy change benefited Saudi banks by improving the valuation of certain securities, as noted by Fitch, and created a more favorable environment for non-interest income growth. 

Another critical factor underpinning Saudi banks’ profitability has been their robust asset quality and prudent risk management.  

The average impaired financing ratio, according to Fitch Ratings, remained low at 1.5 percent by the end of the third quarter, with provision coverage at a healthy 116 percent.  

This stability reflects the resilience of Saudi banks in managing risks associated with their expanding financing books, which grew by 3.6 percent during the quarter, led by strong performances from banks like Aljazira, Saudi Awwal Bank, and Saudi Investment Bank. 

The sector’s healthy operating environment is supported by the Kingdom’s broader economic stability and strategic investments under Vision 2030, which continue to drive demand for corporate financing. 

While external liabilities and a negative net foreign asset position present challenges, Saudi banks remain well-capitalized, with average Common Equity Tier 1 ratios of 15.6 percent, and are positioned to maintain strong asset quality metrics as they navigate a shifting global monetary landscape. 

The combination of rising non-interest income, strategic funding diversification, and favorable monetary policy shifts underscores the resilience of ��������Ƶ’s banking sector, making it a key player in the region’s economic transformation. 

As SAMA continues to align with global trends, Saudi banks are poised to further strengthen their profitability while maintaining a balanced approach to growth and risk management. 

RIYADH: Urban populations across the Gulf Cooperation Council region are projected to grow 30 percent from 2020 to 2030, increasing demand for housing, infrastructure, and inclusive development, analysts say.

In its latest report, international management consulting firm Arthur D. Little said that 90 percent of GCC residents will live in cities by 2050, providing a $150 billion economic regional opportunity.

The study revealed that ��������Ƶ is leading this transition, with the Kingdom eyeing to build 500,000 new housing units to meet the rising demand. 

��������Ƶ is undertaking a dozen giga-projects to address the needs of its growing urban population. These developments are key to the government’s economic diversification goals, forming a core component of Vision 2030.

“We’re witnessing a paradigm shift. This isn’t about building cities — it’s about creating living, breathing economic ecosystems that grow from within local communities,” said Rajesh Duneja, lead researcher at Arthur D. Little. 

Driven by Vision 2030 objectives and its Quality of Life Program, ��������Ƶ is striving for three of its cities to be recognized among the top 100 in the world for livability.

The consulting firm added that the Kingdom’s ongoing efforts are not just a construction initiative but a catalyst for opportunity, education, and long-term economic contribution, with ��������Ƶ embedding workforce development, small and medium enterprises, and local engagement in this journey. 

Earlier this month, a report released by real estate and investment management firm JLL said that the ongoing urban infrastructure development in ��������Ƶ is creating new hotspots for growth, driven by a surge in tourism and economic diversification efforts. 

In July, an analysis by British property consultancy Savills said that the Kingdom’s capital city, Riyadh, is poised to be one of the fastest-growing metropolizes in the world over the next decade, driven by the growth of the country’s mega projects. 

In July, a report released by Statista also outlined urbanization progress in Arab world nations, with Kuwait already having a 100 percent urban population in 2023. 

Statista added that 99.35 percent of people in Qatar live in urban areas, followed by Bahrain, the UAE, and ��������Ƶ, with 89.87 percent, 87.78 percent, and 84.95 percent, respectively. 

The Arthur D. Little report said the surging demand for housing and infrastructure in the region also calls for community-driven strategies to adopt a more inclusive approach, as traditional infrastructure models alone cannot meet the scale of this demand. 

“The pace of urbanization across the Middle East, especially ��������Ƶ, is unprecedented. To ensure that ambitious goals, such as those embodied in Vision 2030, are reached, it is vitally important that communities participate in, and feel part of, the changes,” said Arthur D. Little. 

The analysis added that these community-focused strategies are not only enhancing social impact but also driving economic growth. 

The management consulting firm projected that community-focused initiatives could support the region’s 4 percent gross domestic product growth trajectory, reinforcing its economic resilience amid global challenges. 

“This is not just urban development. It’s the emergence of a new economic blueprint that places human potential at its core,” said Maurice Salem, principal at Arthur D. Little Middle East. 

According to the study, the region’s demographic profile also strengthens the necessity for a community-driven approach. 

“With only 3 percent of the population in ��������Ƶ over the age of 65, the Middle East has an unparalleled opportunity to leverage its young, dynamic workforce,” said the report. 

It added: “When integrated with local talent, cultural heritage, and SME development, infrastructure projects become engines of socio-economic transformation.”