Saudi Arabia: Saudi Arabia’s bank loans reached SR2.88 trillion ($768.93 billion) in October, a 12.46 percent annual growth and the highest in 20 months, official data showed.

According to figures from the Saudi Central Bank, also known as SAMA, this growth reflects strong corporate and personal lending trends, driven by the Kingdom’s expanding economic activities.

Corporate loans were the main driver, surging 15.77 percent to SR1.54 trillion. This increase highlights the significant contribution of the real estate, wholesale, retail, and manufacturing sectors to the Kingdom’s economic dynamism.

Real estate activities led the charge, representing 20.29 percent of corporate lending and growing by 27.37 percent to SR312.4 billion.

Wholesale and retail trade accounted for 13 percent of corporate lending, reaching SR200.63 billion with an annual growth rate of 9.06 percent. 

The manufacturing sector, a key component of Vision 2030’s economic diversification goals, represented 11.68 percent of lending at SR180.05 billion.

Meanwhile, electricity, gas, and water supplies contributed 11.32 percent to the total, growing significantly by nearly 30 percent to reach SR174.57 billion.

Notably, professional, scientific, and technical activities, though holding a smaller 0.54 percent share of corporate credit, witnessed the most significant surge, with a 53.55 percent growth rate to SR8.27 billion.

On the personal loans side, which includes various financing options for individuals, the sector grew 8.89 percent annually to SR1.34 trillion. This expansion underscores the continued confidence in consumer lending and the Kingdom’s economic diversification strategies.

In October, Saudi banks’ loans-to-deposits ratio also increased to 80.73 percent, up from 79.69 percent in the same month of 2023, as per data from the SAMA.

The calculation includes loans minus provisions and commissions, providing a clearer view of actual lending capacity.

SAMA has set a regulatory limit of 90 percent for loans-to-deposits ratios, balancing banks’ lending capacity with liquidity stability while supporting economic growth through corporate and individual borrowing.

Compared to other GCC nations, such as the UAE where loans-to-deposits ratios can exceed 100 percent, SAMA’s cap reflects a more cautious approach, prioritizing liquidity stability in the banking sector.

Saudi Arabia’s corporate and real estate lending are experiencing unprecedented growth, fueled by a combination of favorable economic conditions, government initiatives, and strategic investments under Vision 2030.

As the Kingdom accelerates its transformation, the demand for financing across key sectors, particularly real estate, has surged, reflecting its rapid urbanization and infrastructure development. 

The Saudi Central Bank’s decision to mirror the US Federal Reserve’s policies, reducing interest rates by 50 basis points in September and an additional 25 basis points in November, has created an attractive borrowing environment.

This rate adjustment is anticipated to further boost real estate lending, allowing developers and individuals to capitalize on lower financing costs.

Real estate development remains central to Saudi Arabia’s economic diversification goals. Under Vision 2030, initiatives to position Riyadh as a global business hub and the Regional Headquarters Program have significantly increased demand for commercial real estate.

These efforts are complemented by giga-projects like NEOM and Red Sea Global, which are redefining urban landscapes with sustainable and energy-efficient designs.

The Public Investment Fund’s commitment to green building practices, with over $19.4 billion allocated to eligible green projects, underscores the alignment between real estate growth and environmental sustainability.

In October, PIF highlighted its green bond investments, including $6.3 billion earmarked for green building projects. These investments aim to set new standards in energy efficiency, saving up to 20 percent of energy compared to conventional buildings and avoiding thousands of tons of carbon emissions annually.

Projects such as NEOM’s sustainable water infrastructure further illustrate how the Kingdom is integrating advanced sustainability measures into its development agenda.

Wholesale and retail market

The growing share of wholesale and retail trade lending by Saudi banks reflects the sector’s pivotal role in the Kingdom’s economic evolution. 

This expansion is underpinned by a combination of government incentives, private sector dynamism, and increased consumer demand.

The Saudi government has actively encouraged the growth of this sector through measures like tax exemptions, financing initiatives, and technology transfer programs.

These policies have created a fertile ground for local entrepreneurs and attracted foreign companies eager to capitalize on Saudi Arabia’s business-friendly environment.

Consumer demand is a key driver, with rising interest in diverse products such as electronics, apparel, and food items.

The emergence of e-commerce platforms has further revolutionized the sector, enabling online retailers to reach broader audiences with ease, thereby increasing market participation.

According to data from 6Wresearch, such initiatives have heightened competition, lowered prices, and benefited both consumers and traders, adding to the sector’s momentum.

The sector’s importance is also evident in employment trends. 

According to a report by DataSaudi, the wholesale and retail trade sector employed over 1.64 million people in the second quarter of 2024, making it one of the largest employers in the Kingdom, alongside construction and manufacturing.

This employment surge highlights the sector’s contribution to economic stability and growth.

However, challenges persist. Intense competition, pricing pressures, and the entry of international brands partnering with local retailers are sparking pricing wars that could erode profit margins for some players, according to 6Wresearch.