Global credit rating agency Moody's affirmed the strength of the Saudi banking sector, maintaining its stable outlook for the sector, driven by a strong operating environment and continued government support for diversifying the economy away from oil.
In its latest report, the agency highlighted positive indicators reflecting the health of the Kingdom's financial system, forecasting that credit growth will jump by approximately 8% this year. This growth is supported by the significant momentum in major development and infrastructure projects under the umbrella of "Saudi Vision 2030.".
Strong financial indicators and the lowest level of non-performing loans
Moody's data highlighted a bright spot in the performance of Saudi banks, with the non-performing loan ratio stabilizing at 1.3%, its lowest level in history. This figure reflects the quality of banking assets and the efficiency of risk management in Saudi banks, in addition to the effective supervisory role played by the Saudi Central Bank (SAMA) in ensuring the stability of the financial system.
The agency also explained that Saudi banks will continue to operate with strict cost controls while maintaining high operational efficiency, which enhances profitability and keeps provisioning costs at low levels, giving a strong boost to the banks' solvency.
Economic context and the role of the non-oil sector
This strong performance of the banking sector is closely linked to the structural economic transformations underway in the Kingdom. Moody's has projected that non-oil economic growth will accelerate from 3.7% in 2025 to 4.2% in 2026. This growth in non-oil sectors, such as tourism, entertainment, and industry, creates significant financing opportunities for banks and reduces the overall economy's dependence on the volatility of global energy prices.
This shift is part of a broader strategy to enhance the sustainability of the Saudi economy, with banks playing the role of financial engine to finance private sector investments and major companies leading the implementation of Vision projects.
Regional perspective: Gulf banks and sovereign support
Regionally, Moody's report addressed the banking sector in the Gulf Cooperation Council (GCC) countries, noting that the strength of government financial reserves acts as a safety valve for the sector. The agency affirmed that Gulf governments, which hold significant ownership stakes in their banking systems, continue to provide the necessary support, thus bolstering confidence in financial institutions and supporting their ability to attract stable deposits.
The agency concluded its report by emphasizing the pivotal role that banks play in the region as a key partner in economic diversification strategies, which puts them in a good position to capitalize on future investment opportunities despite global economic challenges.
