...Key Message on 2017: All Saudi Islamic banks benefitted from improved liquidity conditions although challenges remained, including rising financing impairment charges (FICs) and limited growth opportunities. Saudi Islamic banks are well placed and have the largest retail franchises in the banking sector, providing them with a lower cost of funding than conventional banks. Asset Quality: Impaired financing ratios increased for both Islamic and conventional banks in 2017 but the deterioration was less pronounced in Islamic banks owing to an improvement in Al Rajhi, the largest Saudi retail bank. The average coverage ratio remained higher in Islamic banks, benefitting from some of the strongest ratios in Saudi Arabia (at Al Rajhi and Alinma). FICs are higher at Islamic banks, predominantly due to a higher proportion of retail banking, but conventional banks have been catching up due to extra provisions in advance of IFRS 9. Performance: Islamic banks' performance improved and remained above...
