Arab News, Tuesday, Mar 14, 2023 | Sha'ban 22, 1444
Saudi banking sector sees profit surge: Boston Consulting Group
Saudi Arabia: Saudi Arabia’s banking
sector boomed in 2022 on the back of potent revenue growth and is set for
further gains, according to the Boston Consulting Group.
Analysis by the US-based firm reported the
Kingdom’s banking profits after taxes have grown an average of 7.9 percent per
year since 2016 – although there are huge variations within that time frame due
to global events such as the pandemic.
In 2022, the sector recorded a 14 percent rise in
profits compared to the previous 12 months.
Its profitability was due to “the Kingdom’s
ambitious Vision 2030 initiative and an economic boom experienced across the
Gulf Cooperation Council countries,” noted the report.
Recovery in oil prices combined with increased
interest rates are key contributors to a post-pandemic revival, boosting
economic growth and consumer spending, according to BCG.
"The banking sector in Saudi Arabia is
well-positioned for growth in the coming years. The Kingdom's Vision 2030
initiative, along with high energy prices and an increase in tourism, are
driving an economic boom in the GCC, and Saudi Arabia is at the forefront of
this trend," according to Markus Massi, managing director and senior partner at
As per Vision 2030, Saudi Arabia has planned and
started executing numerous mega-projects, initiatives and reforms which expand
the Kingdom and divert its economy away from oil.
“These developments are being mirrored in the
performance of the banking sector in Saudi Arabia, which is experiencing a
period of much-welcomed profitability,” noted the report.
The Kingdom is also set to be boosted by rising
energy prices, with BGC citing forecasts that exporters in the Middle East and
Central Asia will see a windfall of around $1.4 trillion more by 2027 than
“Much of this will flow to exporters in the GCC,
which number among the top energy-exporting nations in the world,” added the
BCG also argues that inflation has not been an
issue in the region, despite the economic instability worldwide.
"Inflation in Saudi Arabia has been controlled,
thanks to high oil prices and less impact from current geo-political events.
This, coupled with the Kingdom's efforts to diversify its economy, bodes well
for the future of the banking sector,” said Martin Blechta, principal at BCG.
In addition, BCG’s report identified four
opportunities for banks to consider to further strengthen their position in the
Saudi banks should manage their funding
effectively, revisit and re-balance their product strategies, invest for growth
and leverage partnerships, noted the report.