Saudi bank mortgage portfolios to expand 30 percent annually

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Dubai

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.—AN