Saudi banks to perform well in 2023 despite tighter liquidity: Fitch

Saudi banks are expected to perform well this year despite tighter liquidity, as the favorable operating environment will continue to benefit profitability metrics, Fitch Ratings said in a recent report.

The non-oil economic growth is likely to boost banks’ profits in 2023, backed by government spending, growth in the private sector credit, lower employment rates and the continued strategy of Vision 2030.

Fitch expected average sector financing growth to slow to about 12% in 2023 (compared to 14% in 2022), but to remain above the GCC average, forecast to range between 5% and 6% this year.

Strong demand for mortgage financing, underpinned by a state subsidy program, has supported financing growth in recent years. Mortgage loans are expected to continue declining in 2023 and 2024 on lower government support for these loans.

The regulatory authorities in Saudi Arabia are expected to continue injecting liquidity in the banking system, when necessary, to support financing growth, Fitch added, noting that the availability of financing is the key for implementing Vision 2030.