How Saudi Arabia's top 10 banks performed in the second quarter

23 September 2021 3 min. read

Global management consulting firm Alvarez & Marsal has released its second quarter analysis of the state of Saudi Arabia's banking sector. A round of the report's key findings in six charts. 

Aggregate operating income increased for the fourth consecutive quarter, by 8.4% compared to the first three months of this year. 

Aggregate Operating Income Increased for the Fourth Consecutive Quarter

The net interest margin (NIM) of the ten banks examined improved after deteriorating in the previous quarter. NIM improved by 10 bps quarter-on-quarter to reach 3.12% as sector-wide margins bounced back. 

NIM Improved After Deteriorating in the Previous Quarter

Across the board, the operating efficiency of Saudi Arabian banks deteriorated significantly driven largely by a 13.7% increase in operating expenses, after improving substantially in the previous quarter. 

Operating Efficiency of KSA Banks Deteriorated Significantly, After Improving Substantially in the Previous Quarter

A benchmark of the banks examined shows that five of the ten institutions witnessed an improvement in the cost to income ratio. Saudi National Bank and Bank Aljazira saw the largest deterioration in their operating efficiency.

Operating Efficiency Deteriorated Substantially for SNB, ARNB and BJAZ

Total impairments of the banks examined increased by ~82% in the second quarter of 2021 to SAR 4.6 billion. The spike in impairments was primarily due to SAR 2.4 billion of impairment booked by Saudi National Bank – excluding Saudi National Bank from the data leads to a 3.1% quarter-on-quarter decrease in aggregate impairments.

Cost of Risk Impacted as SNB Reported One-Time Merger Related Impairments

In conclusion

All factors considered, aggregate net income decreased by 8.1% quarter-on-quarter to SAR 11.0 billion, with the increase in net interest income not able to offset the higher operating expenses (+13.7% quarter-on-quarter) and higher impairments (+82% quarter-on-quarter).

Higher Operating Expenses and Impairments Weighed on Net Income

About the Saudi Arabia Banking Pulse
In its quarterly ' Saudi Arabia Banking Pulse' series, experts from Alvarez & Marsal examine the financial performance and key performance indicators of the top ten largest listed banks by assets: Saudi National Bank, Al Rajhi Bank, Riyad Bank, Saudi British Bank, Banque Saudi Fransi, Arab National Bank, Alinma Bank, Bank Albilad, Saudi Investment Bank, and Bank Aljazira.

The Banking Pulse aims to help banking executives and board members in the Kingdom stay up-to-date on industry trends and developments.