Saudi Gazette report

RIYADH — Ayman Al-Sayari, governor of the Saudi Central Bank (SAMA), said Saudi Arabia’s economy witnessed robust growth during the year 2022 despite the global economic challenges. He said the financial system has contributed remarkably to the strong economic performance.

In his comments about the SAMA report for the year 2022 released on Thursday, Al-Sayari said the Kingdom’s economy showed strong performance in terms of gross domestic product (GDP) and employment rates. “Banks, insurance companies, financing companies, and payment service providers, which are under the supervision of the Central Bank, have worked to expand the scope of financial services, as well as to include all borrowers including private sector stakeholders and individuals,” he said.

Al-Sayari indicated that banks expanded their lending activities to meet the continuous demand for real estate loans. He stressed that the results of risks remained moderate during the year, as a reflection of the strength of the local economy. He said SAMA attached great importance to the strength of the banking system due to the importance of its role in the economy, as all the precautionary ratios for the banking system exceeded the ratios specified in the requirements of Basel, the international standard for bank capital adequacy.

“This reflects a banking system that enjoys strong liquidity and capitalization. In addition, the Central Bank has completed the implementation of the final Basel III reforms, before the date set for the official implementation,” he said. Al-Sayari promised that the Central Bank would continue to support innovation in the financial sector, as a witness to the studied increase in the number of financial technology companies operating in the country. “The precautionary measures put in place by the Central Bank, including the experimental legislative environment, come to protect the interests of customers and ensure the strength of the financial sector, while allowing innovation that serves households and non-financial corporations alike,” he said.

The SAMA chief stressed that the Saudi economy will continue to grow in 2023, supported by the “Vision 2030” initiatives and a solid financial system. “With the continuing challenges facing the global economy, the Central Bank will remain vigilant in front of these potential challenges, and at the same time will continue to monitor local and global developments to maintain the stability and durability of the financial system,” he pointed out.

The SAMA report confirmed that the Saudi banking sector still enjoys good levels of capital, and the precautionary ratios related to liquidity remained at levels higher than the regulatory requirements. Regarding non-bank financial institutions, the report stated that they recorded a strong performance, as the total written insurance premiums for insurance companies rebounded in conjunction with the growth of the non-oil sector while financing companies recorded an increase in total assets.

The SAMA report expected the continued growth of the assets of the banking sector due to the expected demand for lending from the corporate sector, at a time when inflation in Saudi Arabia was expected to remain stable, which would contribute to the overall profitability of the insurance sector.

The financial stability report stressed that the recent developments in the finance companies sector will lead to further diversification of the sector’s activities. It also pointed out that the Saudi banking sector was not affected by global economic developments, inflationary pressures and tightening monetary policy, in addition to that bank credit recorded a growth of 14 percent at the end of 2022.

The report pointed to the increase in the total insurance premiums written for the sector by the end of 2022, reaching 26.9 percent compared to the previous year, in addition to the increase in the assets of financing companies by 6.5 percent on an annual basis, to reach SR57 billion of existing balances. He indicated that the field of payments topped the fields of financial technology in terms of operating companies.

SAMA confirmed that the total assets of the banking sector increased by 10.5 percent while confirming that the Saudi banking sector enjoys good capital, with the capital adequacy ratio remaining at 19.9 percent last year.

The report touched on the slight decline in the rate of non-performing loans for the banking sector, reaching 1.8 percent, compared to 1.9 percent in 2021, indicating an increase in credit granted to micro, small and medium enterprises by 13.1 percent, compared to 10.7 percent in 2021.

The report also confirmed the growth of profitability indicators in the Saudi banking sector at constant rates, as the return on assets and return on equity recorded 2.8 percent and 12.5 percent respectively in 2022, compared to 1.8 percent and 10.8 percent respectively in the previous year.

SAMA stressed the continuation of the decline in non-performing loans to financing companies, which began in 2019, as its ratio improved by 230 basis points, to reach 6.3 percent in 2022.