Saudi banks' financial performance recovers to pre-COVID-19 levels: S&P

Saudi banks' financial performance is almost back to pre-COVID-19 levels, S&P Ratings said in a report, expecting an average return on assets (RoA) of 2% in 2022 compared to 2.1% in 2019.

Higher credit growth momentum will continue in the second half of the year to reach about 15% in 2022, backed mostly by stronger-than-expected performance in the mortgage portfolio.

S&P still believes that higher interest rates and market saturation will eventually curb mortgage origination. The rating agency also believed that corporate lending will start contributing to loan growth.

The gradual increase in interest rates will continue to feed Saudi banks' margins, eventually pushing them up by year-end.

The increasing risk of recessions in US and Europe, along with higher interest rates, could pressure the operating environment, especially if oil prices drop compared to 2022.