Arab News, Monday, May 17, 2021 | Shawwal 5, 1442
Saudi bank mortgage portfolios to expand 30 percent annually says S&P
Saudi Arabia:
Strong housing demand and the government’s commitment to meet Vision 2030
targets is expected to support Saudi credit growth over the next two years, S&P
said.
The credit ratings agency expects mortgage portfolios in the banking sector to
expand by about 30 percent annually over the next couple of years as total
growth is expected to top 10 percent in 2021-2022.
“Our assessment of economic risk reflects our view that the Saudi Arabian
economy recently started to rebound, with global economic conditions and oil
markets improving and the global economy emerging from the pandemic,” S&P said
in a report on Sunday. “We expect government efforts to meet Vision 2030 targets
and strong demand for housing from Saudi nationals will support solid mortgage
and retail loan growth.”
S&P said it expects credit costs to be elevated as the government phases out
pandemic-related support packages. However the Kingdom’s central bank has
consistently encouraged banks to build strong loan loss provisions, it said.
Lenders in the Kingdom also benefit from a low-cost and stable core deposit
base, with limited reliance on external debt. Low cost of funds and
better-than-average cost of risk have supported the banking sector’s
profitability, said S&P.
“We continue to see banks’ healthy funding and liquidity profiles as a key
differentiator when compared with most other banking systems in the region and
globally,” it said.
Despite the jump in mortgage lending, house price growth has been muted in the
Kingdom because of a strong supply pipeline and the absence of speculation.
“We expect only modest growth in prices in real terms over the next few years,”
said S&P. “We also note that commercial real estate prices performed much weaker
than residential ones. Changes in customer behavior and a shift toward online
deliveries and more widespread remote work could put pressure on this segment of
the market.”