Cost of finance up 30% in 2022, big portion of portfolio at fixed rates: Amlak MD

Abdullah Turki Al Sudairy, CEO of Amlak International Finance Co.

The cost of finance in Saudi Arabia increased by 25-30% year-on-year (YoY) in 2022, CNBC Arabia reported, citing Abdullah Al Sudairy, Managing Director of Amlak International Finance Co.   

The Saudi market witnessed a decline in borrowing activity, aligning with the aim of the policy rate hikes, said Al Sudairy, adding that Amlak arranged around SAR 1 billion worth of mortgage loans.    

Amlak mapped out an integrated strategy in 2022, obtained the approval of the Saudi Central Bank (SAMA) for the required permits in Q3 2022, as well as the general meeting’s go-ahead in Q4 2022.  

 Al Sudairy indicated that the company in 2023 began to prepare for the launch of its products, expecting a relevant financial impact in the medium and long terms.   

The consumer financing and funding provided for large and medium-sized enterprises represent a huge market in Saudi Arabia, and therefore, if Amlak grabs a considerable share in this market, this will positively impact its financing portfolio as well as its financial performance.    

Amlak’s financing portfolio demonstrates solid performance, he said, adding that the company plans to switch to higher-margin consumer finance, in addition to financing small and medium-sized enterprises.   

The majority of Amlak’s financing portfolio comes at fixed rates, and the company is already hedging against high interest rates, Al Sudairy said, noting that new financing transactions pressure profit margins, as the interest-rate hikes can’t be passed to the new clients.    

Amlak net profit dropped by 10% to SAR 96.7 million in 2022, from SAR 107.8 million a year-earlier, according to data compiled by Argaam.