RIYADH: Saudi Arabia’s banking sector saw a 3.74 percent quarterly increase in aggregate net income in the third quarter of 2023 to reach SR18.03 billion ($4.8 billion) from SR17.38 in the previous quarter, according to a recent report.

In its latest report, global professional services firm Alvarez & Marsal highlighted that the operating income of Saudi banks increased by 2.9 percent quarter on quarter, primarily fueled by a 3.8 percent growth in net interest income.

However, a slight decline in non-core income, 0.5 percent, partially offset these gains. Reducing impairment charges by 17.9 percent quarter on quarter also played a key role in bolstering net profit growth.

A notable improvement was observed in the loan-to-deposit ratio, which climbed by 2.3 percent quarter on quarter, reaching 98.4 percent — the highest in four years.

This surge was underpinned by a robust growth in loans and advances, outpacing the rise in deposits.

Return on equity for Saudi banks also improved by 70 basis points quarter on quarter, reaching 16.4 percent, while return on assets remained steady at 2 percent.

A moderate growth trajectory was seen in both lending and deposit mobilization, with loans and advances expanding by 2.9 percent quarter on quarter, surpassing deposit growth, which stood at 0.5 percent.

Key trends for the third quarter of 2023 showed corporate and wholesale lending as the primary driver of a 2.9 percent quarter on quarter increase in loans and advances.

The total operating income also saw a marginal decline of 2.9 percent quarter on quarter, with a notable increase in aggregate net interest income to SR26.3 billion.

The cost-to-income ratio experienced a slight deterioration due to increased operating expenses, and the cost of risk showed improvement, reflecting enhanced asset quality across the sector.

The report, using data from 16 different metrics, evaluates key performance areas of banks, including size, liquidity, income, efficiency, risk, profitability, and capital.

The report’s analysis included the top 10 listed banks in Saudi Arabia, including 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.