Covid-19 headwinds to hurt Saudi banks’ profitability
DECLINE IN INTEREST INCOME CURTAILS SAUDI BANKS’ OPERATING INCOME
Saudi Banks’ profitability that witnessed improvement in the first quarter of 2020 is likely to be impacted by Covid-19 headwinds according to global professional services firm Alvarez & Marsal.
In its first ever KSA Banking Pulse report released yesterday, A&M said that the top banks in Saudi Arabia showed mixed performance in first quarter of 2020 as improved operating efficiency and lower provisioning was offset by the effect of reduced interest rates.
The report examines the data of the 10 largest listed banks in the KSA, comparing the first quarter of 2020 against the previous quarter.
Profitability
Despite the outbreak of Covid 19, the performance of KSA banks in terms of loans and advances growth has been encouraging as it grew by 4.9 per cent quarter on quarter in the first quarter of 2020.
Profitability has also improved with return on equity (RoE) increasing to 12.5 per cent in the first quarter of the year, as increased operating efficiency and lower provisioning helped in negating the effect of lower operating income. “We have seen that profitability of the top KSA banks in the first quarter of 2020 showed substantial improvement,” said Dr. Saeeda Jaffar, A&M Managing Director and Head of Middle East.
Loans & advances and deposits of the top ten banks in Saudi Arabia increased even with tough macroeconomic conditions. Despite the lockdown measures announced towards the end of the first quarter of 2020, loans and deposits increased 4.9 per cent and 1.5 per cent.