Saudi Banks Deliver Stronger-Than-Expected Q1 Earnings Despite Geopolitical Tensions
First-quarter net profit across listed banks rose 8% year-on-year to $6.4 billion (SAR 24 billion), exceeding consensus estimates by 3%
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[Image: Chetan Jha/MITSMR Middle East]
Saudi-listed banks delivered a stronger-than-expected start to 2026, underscoring the sector’s resilience even as geopolitical tensions weighed on regional sentiment. According to a new report by Al Rajhi Capital, first-quarter net profit across listed banks rose 8% year-on-year to $6.4 billion (SAR 24 billion), exceeding consensus estimates by 3%.
The earnings expansion was led by robust performances from Al Rajhi Bank, Saudi National Bank, and Bank Albilad, despite the onset of the Iran war on February 28. Growth was primarily supported by an 8% rise in funded income and a sharp 38% decline in provisions, highlighting improving asset quality and lower credit stress across the system.
Yet beneath the headline strength, pressure points are beginning to emerge. Non-funded income fell 3% year-on-year, reflecting regulatory changes affecting fees and commissions alongside softer operating conditions in non-banking businesses. The divergence suggests that while core lending activity remains healthy, ancillary revenue streams are facing structural and cyclical headwinds.
Liquidity dynamics also shifted materially during the quarter. Deposits grew 9% year-on-year and 4% quarter-on-quarter, surpassing credit growth for the first time in two years. Strong government deposit inflows and relatively muted borrowing demand helped ease pressure on the sector’s loan-to-deposit ratio, allowing net interest margins to remain broadly stable amid softer pricing competition.
Most lenders maintained existing guidance, although Al Rajhi Bank revised its net interest margin outlook upward.
Looking ahead, analysts expect investor attention to center on SME lending momentum and the trajectory of corporate credit demand. The pace of financing tied to Saudi Arabia’s Vision 2030 projects in the second half of 2026 could prove decisive in determining whether the sector enters a broader re-acceleration cycle after a period of moderated loan growth.
